GBP/USD holds above 1.2650 after mixed UK data, focus on US retail sales

• GBP/USD holds steady following the release of mixed UK GDP and industrial production data.
• The UK’s GDP grew by 1.0% in the third quarter, outpacing the 0.7% growth recorded in the second quarter.
• UK monthly industrial and manufacturing production decreased by 0.5% and 1.0%, respectively, in September.

GBP/USD breaks its five-day losing streak, trading around 1.2680 during the European session on Friday. The pair remains stable after the publication of mixed data on the Gross Domestic Product (GDP) and industrial production from the United Kingdom (UK).

The UK economy grew by 0.1% quarterly in the three months ending in September, following a 0.5% expansion in the second quarter. This growth did not meet market expectations of a 0.2% increase. On a year-on-year basis, UK GDP rose 1.0% in the third quarter, in line with forecasts but higher than the 0.7% growth recorded in the second quarter.

In September, the UK’s monthly GDP contracted by 0.1%, reversing a 0.2% expansion in August and missing expected growth of 0.2%. The Services Index for the three months ending in September was stable at 0.1% 3M/3M, unchanged from the previous reading. However, industrial and manufacturing production declined in September, falling 0.5% and 1.0% month-on-month, respectively. These numbers were weaker than anticipated.

The US dollar (USD) eases on comments from Fed Chair Jerome Powell on Thursday. The Fed’s Powell stated that the recent performance of the US economy has been “remarkably good,” allowing the Federal Reserve the flexibility to gradually reduce interest rates. Meanwhile, Richmond Fed President Thomas Barkin said that although the Fed has made strong progress so far, there is still work to be done to maintain momentum.

Additionally, the US Producer Price Index (PPI) rose 2.4% year-on-year in October, up from a revised 1.9% increase in September (previously 1.8%) and beating market expectations of 2.3%. Meanwhile, the core PPI, which excludes food and energy, rose 3.1% year-on-year, slightly above the 3.0% forecast.

The US Dollar Index (DXY), which tracks the performance of the dollar against six major currencies, is trading around 106.70, having retreated from its yearly high of 107.06 recorded on Thursday. This decline could be attributed to a slowdown in “Trump trades.”