GBP/USD and GBP/EUR market update

UK GDP Beats on September Monthly, But Dollar Dominance Keeps GBP/USD Pinned; EUR/USD Tests Year-Low Territory as Fed-ECB Differential Widens, Thursday, 12 November 2026

GBP/USD: 1.3270 | GBP/EUR: 1.1962 | EUR/USD: 1.1093

This morning's ONS GDP release delivered the data that markets had been waiting for all week, confirming that the UK economy accelerated through Q3, but the pound's response has been muted because the dominant macro theme remains the dollar's post-CPI strength. The dollar index rose to 102.90 on Wednesday, its highest level since April 2025, as October's hot CPI and hawkish Fed commentary lifted odds of a more aggressive December move. With both the Fed and ECB now firmly in tightening mode into their simultaneous 17 December meetings, EUR/USD is the pair most exposed to shifts in relative rate expectations today.

Overnight & Market Tone:

GBP/USD opened at 1.3276 and has traded in a 1.3250-1.3283 range on the day, a narrow band that reflects the tug-of-war between supportive UK data and a broadly firm dollar. EUR/GBP was trading at 0.83563 at 08.12am UK time, up just 3 pips from Wednesday's New York close of 0.83533, implying GBP/EUR near 1.1972, marginally firmer than our database spot. The FTSE 100 opened 0.21% higher, trading around 10,854, with Burberry and Barratt Redrow among the early outperformers. The 10-year gilt yield hovered just above 5.20%, rebounding from its lowest level in more than two months as investors digested the strong UK economic releases. The VIX stood at 18.44, up 5.4% on the session, and Brent crude was trading near $93.00 per barrel, broadly steady.

UK Data & Bank of England:

Britain's economy grew 0.7% in Q3 2026, faster than its 0.5% expansion in Q2, in line with the Reuters consensus forecast of 0.7% quarter-on-quarter. GDP was also 1.9% higher year-on-year between July and September. The composition was notable: computer programming and consultancy rose 4.4% in the quarter, the biggest single driver of UK growth in 2026, which the ONS links to AI and cloud computing activity. September's monthly GDP rose 0.2%, better than the flat reading forecast. August's figure was revised down from the previously reported 0.1% growth, while July's estimate remained unchanged. The data are consistent with the BoE's upgraded outlook: the Bank now expects GDP to expand 1.6% this year, materially stronger than the OBR's 1.2% forecast published after Chancellor Healey's 28 October budget. On monetary policy, the MPC voted 8-1 to increase Bank Rate by 0.25 percentage points to 4% at its meeting ending 4 November 2026, with Catherine Mann favouring a larger 50bp move, while Swati Dhingra and Alan Taylor, who had previously favoured holding, supported the increase, reflecting concern that higher energy prices could feed through into more persistent inflation. The next MPC decision is on 17 December. As of 9 November, OIS pricing implied a 58% chance of a further 25bp hike at that meeting. Today's GDP beat, particularly the September monthly outperformance, may nudge that probability modestly higher through the session.

European Backdrop & EUR/USD:

The ECB's policy trajectory is well-telegraphed: the ECB raised its deposit facility rate to 2.50% in September 2026 and left it unchanged at its 29 October meeting. The next Governing Council decision is on 17 December, and as of 11 November OIS pricing implies a 94% chance of a 25bp hike to 2.75% at that meeting. ECB Chief Economist Philip Lane said it would be "prudent indeed to hike" if the information set is unchanged in December, while Governing Council member Martins Kazaks backed "some further tightening," though he flagged trade-offs between inflation and growth. Longer-term, Nomura projects further hikes in December 2026 and March 2027, taking the terminal rate to 3.00%, arguing that the Iran war has kept commodity energy prices elevated for long enough to warrant two further moves. Yet the hawkish ECB narrative is providing little support to EUR/USD. Analysts note that currency markets reward central banks that tighten from a position of strength; the ECB is hiking into slowing activity and French fiscal stress, while US data remains robust. EUR/USD sits near 1.1093, close to the bottom of its recent range. The pair remains within a broader bearish structure, with the recent low around 1.1103 now acting as a reference point. A sustained break below 1.1105 would represent a new 52-week low for the pair. The key driver for EUR/USD today is the Fed-ECB differential: with the Fed priced for a near-certain December hike and a non-trivial probability of 50bp, versus an ECB hike that is already 94% priced, any further hawkish Fed repricing widens the differential and presses EUR/USD lower. Treasurers with direct EUR/USD exposures should treat the 1.1093-1.1105 zone as a critical near-term floor; a break opens a path toward 1.1050.

US Backdrop:

CME FedWatch pricing puts the probability of a December Fed hike at 100%, with the odds of a 50bp move at 13.2%, leaving the base case as a 25bp increase to the 4.25%-4.50% range. Fed Governor Waller said during remarks in London that he would consider backing a 50bp hike at the December meeting if core inflation continues to come in at 0.3% or higher, a threshold that October's CPI met. The two-year US Treasury yield surged nearly 19 basis points to 4.736% on Tuesday, its biggest daily gain since April 2025; the 10-year UST is trading near 4.998% this morning per market data. The US calendar today is light, with no tier-one releases scheduled, meaning the dollar's near-term direction will be driven by Fed speaker commentary and any further repricing of the December meeting size.

Technical Picture:

GBP/USD: Resistance at 1.3283 (today's session high), then 1.3323 (Wednesday's close) and 1.3380. Support at 1.3250 (today's session low), then 1.3200 and 1.3135 (recent range low).
GBP/EUR: Resistance at 1.1972 (early session high), then 1.2002 (52-week high per BoE data). Support at 1.1940 (Tuesday's two-week low per Reuters), then 1.1920 and 1.1900.
EUR/USD: Resistance at 1.1105 (recent floor now acting as resistance), then 1.1127 (ECB reference rate 11 November) and 1.1150. Support at 1.1093 (current spot), then 1.1050 and 1.1000 (psychological).
Outlook: GBP/USD is range-bound between 1.3250 and 1.3323 with a mild upward tilt on the GDP beat, but the dollar's structural bid limits any sustained recovery; EUR/USD faces the greater directional risk, with a break below 1.1093 opening a move toward 1.1050 if US speakers reinforce the 50bp December narrative.

Today's Calendar:

The key event has already landed: the ONS Q3 GDP first estimate confirmed +0.7% q/q with a September monthly beat, but the market's focus will now shift to any Fed speakers who may further refine the 25bp-versus-50bp December debate, making the afternoon session the more volatile window for USD crosses.

Outlook:

GBP/USD is likely to remain in a 1.3250-1.3323 consolidation range for the remainder of the session; the GDP beat provides a modest floor but is insufficient to overcome the dollar's structural bid ahead of the 9 December FOMC, and any Fed speaker reinforcing the 50bp scenario would be the primary downside risk for GBP/USD and EUR/USD alike. For GBP/EUR, the pair's near-term direction hinges on whether today's UK growth data prompts further repricing of the December BoE decision toward a second consecutive hike, which would be GBP-supportive; treasurers with EUR payables should note that the 1.1940-1.2002 range has held for over a week and a break in either direction is more likely to be triggered by central bank communication than by data between now and the 17 December meetings.

This commentary is provided for informational purposes only and should not be construed as investment, legal, or tax advice. Past performance is not indicative of future results. Please consult with qualified professionals before making any financial decisions.