GBP/USD soars to 10-month highs on UK GDP report

British pound rose to highs unseen in ten months against the US dollar, after the Office for National Statistics (ONS) reported that the GDP in the United Kingdom has been driven mostly by consumer spending in the third quarter of the year.

GBP/USD reached a session high at 1.6295 at 10:15 GMT, which is the highest level since January 2nd. Support was likely to be encountered at November 26th low, 1.6139, while resistance was to be met at January 2nd high, 1.6381.

Revised data showed that the UK economy grew in the third quarter, as initially expected. In a report by the Office for National Statistics, the Gross Domestic Product rose by seasonally adjusted 0.8% in the third quarter, which is in line with the preliminary estimates and also retained the pace shown during the preceding quarter. On annual basis, UK economy expanded 1.5% in Q3 compared to the same period last year, which again met analysts forecasts.

The British economy was counting on the consumers spending during the third quarter. The growth of the economy in the third quarter was supported by the fastest pace of growth in consumer spending in the past three years. Consumer spending rose 0.8% in the third quarter. However, Bank of England is sceptical about the prospects of a stable growth, based only on consumer spending given the lower pace of personal income growth.

However, the above mentioned figure may deepen concerns that growth may not demonstrate resiliency, as nations exports dropped 2.4% during Q3, or the largest decline in the past two years. This accompanied by rising imports shaved UK growth by 0.9% during the same period, according to the report.

Earlier today, before the release of the GDP data, Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London, cited by Bloomberg said: “We’ll get the breakdown of where the growth is coming from today and that may give a positive sign that the recovery is broadening and strengthening, but the bigger picture is that the U.K. economy is performing very robustly and that’s supportive for the pound.”

Meanwhile, yesterday it became clear that consumer confidence in the United States unexpectedly decreased in November. The index, gauging confidence among consumers, dropped to a reading of 70.4 in November from the revised up value of 72.4 a month ago. Experts had anticipated that the index will reach 72.1 in November. According to a report by the Conference Board research group, US consumers expressed concerns over employment in the future and also over their income prospects. The sub-index of economic expectations decreased to a reading of 69.3 in November from 72.2 in October, while the gauge of current assessment retreated to 72.0 in the current month from 72.6 in the preceding month.

Elsewhere, EUR/USD climbed to a new daily high at 1.3613 at 9:40 GMT, also the pair’s highest point since October 31st, after which consolidation followed at 1.3610, rising 0.27% for the day. USD/JPY reached a session high at 101.73 at 7:30 GMT, after which the pair consolidated at 101.70, up 0.43% for the day.

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