20.10.202612:02 Analisis Forex & Kajian: GBP/USD: Strong GDP Growth, Weak Industrial Output, and a Potential November Rate Hike

UK GDP growth over the three months to August reached 0.7%, significantly exceeding the 0.5% recorded in the previous period. The services sector expanded by 0.9%, becoming the main driver of growth. This figure exceeded expectations and prompted some analysts to revise their third-quarter growth forecasts upward.

However, the composition of growth raises concerns. Industrial production contracted by 0.2% over the same three-month period. Mining and quarrying output fell by 0.6%, while manufacturing recorded marginal growth of 0.1%. In other words, the economy is expanding on the back of the services sector, while manufacturing, particularly energy-intensive and raw-material-based industries, remains stagnant.

The employment data released this week did not come as a surprise but confirmed the existing trend. According to preliminary estimates, the number of employees fell by 26,000 in August, extending a two-year downward trend. The situation has not become any easier for the Bank of England. A weakening labor market reduces the risk of second-round inflationary effects through wages, which is a positive factor. However, a further slowdown in employment amid the energy shock strengthens the argument that the economy may not withstand additional monetary policy tightening, which could be an even greater concern.

Speaking at the annual meetings of the International Monetary Fund and the World Bank in Bangkok, Bank of England Governor Andrew Bailey said there was still little evidence of second-round inflationary effects and that these effects remained "very subdued." He added that the economy had proved "more resilient than we expected." Megan Greene, by contrast, adopted a considerably more hawkish stance. In her view, economic growth is stronger than expected and the labor market remains resilient, suggesting that the Bank of England is not applying sufficient pressure to bring inflation down.

Market consensus on interest rates appears to have emerged: the Bank of England is expected to raise its policy rate to 4% on November 5. The pound's modest appreciation last week was most likely a reaction to this shift in rate expectations, and the anticipated hike has now been largely priced in.

The key release this week is the September Consumer Price Index (CPI), due on October 21. The forecast points to an increase to 3.5%, up from 3.1% in August, which would mark a ten-month high. Fuel prices are expected to be the main driver. If inflation comes in at 3.5% or higher, the market will become more confident that a rate hike will take place in November.

The net short position in GBP increased by 0.8 billion over the reporting week to -8.91 billion, while the estimated price lost momentum.

In the previous report, it was suggested that the GBP/USD correction would encounter resistance in the 1.3295–1.3310 level. The pound is currently attempting to consolidate above this area, reflecting market expectations ahead of tomorrow's inflation release. If inflation is at least in line with forecasts, the market may be preparing to revise its expectations for the future path of interest rates.

GBP/USD has traded within a relatively narrow range throughout 2026. If inflation does not disappoint, the pound could receive additional support and extend its corrective advance toward the midpoint of the range at 1.3437. A stronger move would require a more powerful catalyst, which is currently lacking. The likelihood of a return to the 1.3137 support level has decreased.