British Pound jumps after strong UK monthly GDP data

The British Pound (GBP) experienced a surge against its peers, with the GBP/USD pair climbing to a near 1.3518 level. This rise occurred as the UK Office for National Statistics (ONS) released strong monthly Gross Domestic Product (GDP) data for July, indicating that the economy expanded by 0.4%, which was higher than the 0.3% growth observed in June.

Market participants anticipated the GDP data to remain flat, but the actual figures surpassed expectations. Furthermore, Industrial and Manufacturing Production data also exceeded forecasts, with Industrial Production growing by 0.2%, and Manufacturing Production increasing at a faster rate of 0.9%. Financial markets may face heightened volatility in the British currency during the upcoming week, as UK economic releases, including employment data for the three months ending July and Consumer Price Index (CPI) data for August, precede the Bank of England's (BoE) monetary policy announcement on Thursday.

It is anticipated that the BoE will maintain policy rates at 3.75%, but key economic data releases before the event could significantly alter interest rate expectations. Economists at Deutsche Bank project a modest rebound in UK inflation during late summer, with the headline CPI forecasted to reach 3.04% year-over-year. Core CPI is expected to slightly decrease to 2.53% year-over-year.

Simultaneously, anticipation for hawkish Federal Reserve (Fed) expectations has grown following the release of a hotter-than-expected US Producer Price Index (PPI) report on Thursday. The odds of the Fed raising interest rates during the upcoming policy meeting have surged to 72.4%, compared to 61.2% prior to the data release. The daily GBP/USD chart is currently trading at 1.3512, slightly below the 20-day exponential moving average (EMA) at 1.3531, suggesting a mildly bearish near-term outlook despite the pair's consolidation near recent highs.

The Relative Strength Index (RSI) stands at 48, indicating a neutral position with no strong directional momentum. Immediate support for GBP/USD is near the 20-day EMA at 1.3531, with the August 28 high near 1.3600. Conversely, if the pair fails to hold the over-a-week low of 1.3475, it could potentially extend its decline towards 1.3400.