Sterling's Tenuous Bounce Amid UK Economic Growth Data

Sterling slightly recovered against the dollar after UK economic data showed unexpected growth in November, largely driven by Jaguar Land Rover's recovery post-cyberattack. Despite this, concerns linger about the economy's momentum and the policy outlook. Traders expect a Bank of England rate cut by September.

The British sterling experienced a modest recovery against the US dollar on Thursday following economic data indicating stronger-than-expected growth in November for the United Kingdom. This growth was significantly attributed to Jaguar Land Rover's resurgence after a recent cyberattack that had temporarily hampered production.

Kallum Pickering, chief economist at Peel Hunt, emphasized that although the data presented an upside surprise, the UK economy remains tepid, primarily affected by policy decisions under the Labour government. The pound dipped slightly, down 0.05% at $1.3443, even as projections suggest that traders anticipate around 40 basis points of Bank of England rate cuts by September.

Additionally, Andrew Wishart, an economist at Berenberg, highlighted ongoing issues concerning the UK's economic momentum, predicting this downturn to extend into 2026 due to job losses and fiscal policies. Analysts note that sterling's previous boost from reduced fiscal and political risks is waning, with attention now shifting to the upcoming UK CPI inflation data scheduled for January 21.

(With inputs from agencies.)