16.01.202601:12 Forex Analysis & Reviews: GBP/USD. The explicable paradox: why the pound weakens on strong GDP data?

Published on Thursday, UK economic growth data exceeded expectations. Almost all components of the report were printed in the "green zone," contrary to the gloomy forecasts of most analysts.

But despite such an unambiguous and one-sided fundamental signal, GBP/USD came under pressure. Largely, the pair mirrors the dynamics of the Dollar Index, which remains afloat thanks to persistent demand for safe-haven assets and fairly strong US macro data.

Still, the report published on Thursday in the UK should not be ignored — it will remind us of itself again, and not in the distant future, when the Bank of England meets in February.

Thus, according to the published data, UK GDP in November increased by 0.3% month-on-month, whereas most analysts had forecast a more modest rise of 0.1% (the same as in the previous month). On a quarterly basis, the indicator rose by 0.1% after zero growth in October. Most experts had expected a contraction of 0.2%.

Other macro indicators are also printed in green. For example, industrial production rose 1.1% m/m, versus a forecast of +0.1%; year-on-year, the indicator jumped to 2.3% after +0.4% in October (forecast was -0.4%). A similar situation occurred in manufacturing: output increased 2.1% m/m after +0.3% in October (forecast +0.5%). Year-on-year manufacturing also rose (by 2.1%), while most analysts had forecast a decline of 0.3% (after -0.4% in the previous month). The services activity index rose to 0.2% (forecast 0.0%).

Only the construction sector disappointed. Activity in construction fell 1.3% m/m in November versus a -0.3% forecast. Year-on-year construction output declined 1.1% after +0.9% in the previous month (forecast -0.1%).

It is worth noting some specifics of the November data. First, the automotive industry made a strong contribution: vehicle output rose by roughly 25%, helped by the recovery of Jaguar Land Rover after a cyberattack (one of the main drivers of industrial growth).

Also note positive dynamics in the services sector (primarily financial services, IT, and professional services). Services traditionally account for more than 70% of UK GDP, so growth in this segment is critically important to the economy.

Another important point is that the reporting period (November) was characterised by fiscal uncertainty and tightening. Nevertheless, business, as we can see, did not pause — companies did not "hibernate" in gloomy expectations, continued to make investment decisions, and adapted to new conditions.

Most importantly, the November data increase the probability of positive GDP growth in Q4 2025 (October's headline indicator was also positive), reducing the risk of a technical recession and improving starting conditions for 2026.

The main conclusion follows: Thursday's report allows the Bank of England to maintain a wait-and-see stance, at least in the context of the upcoming February meeting. Central bank members can now "with a clear conscience" adopt a cautious wording, stating that recent GDP data were positive.

In other words, the published report is unequivocally on the side of the pound. Yet GBP/USD, instead of the expected rise, turned south toward the support level of 1.3350 (the lower line of the Bollinger Bands on the D1 timeframe). Traders are following the greenback, which at the start of the US trading session on Thursday strengthened its positions across the market. And not only due to persistent geopolitical tensions (which are gradually easing), but also due to macroeconomic factors.

In particular, the dollar was supported on Thursday by the Unemployment Claims report, which showed 198k initial jobless claims — the lowest reading since early December.

Other macro indicators are also printed in green. For example, the Philadelphia Fed manufacturing index jumped in January to 12.6 versus a forecast of -1.6 (it was -10.2 in December). For the first time since September, the index returned to positive territory.

The NY Empire State manufacturing index also supported the greenback, rising to 7.7 after falling to -3.9 (forecast was 0.8).

In addition, the import price index (an early signal of inflationary trends) unexpectedly jumped to 0.4%, the highest since January last year.

All these fundamental factors put pressure on GBP/USD. Strong UK GDP data did not help the pair's buyers. The dollar still sets the tone for trade, while the pound plays a "follower" role. Note that GBP/USD sellers failed to break the 1.3350 support (the lower Bollinger Band on the daily chart). If the southward impulse weakens in this area, buyers will likely organise a corrective rebound with targets at 1.3440 (the middle Bollinger Band on H4 and D1) and 1.3470 (the Tenkan-sen on the D1 timeframe).