PoundSterlingLIVE - It was a sea of disappointment from the ONS, who released a tranche of UK economic data that printed below market expectations, boosting the odds for Bank of England interest rate cuts in 2024 and weighing on the Pound.
The British Pound was softer after it was reported the UK economy shrank 0.3% month-on-month in October, a marked slowdown from the 0.2% growth recorded in September, disappointing against market expectations for a flat 0%.
Year-on-year, the economy expanded 0.3% in October, reported the ONS, which was half the 0.6% the market expected and well below the 1.3% output recorded in September. The rolling three-month-on-three-month measure of GDP was flat at 0% in October, unchanged from the previous month but below the consensus of 0.1%.
Manufacturing production rose 0.8% year-on-year, which was half the 1.9% the market expected and sharply lower than the previous month's 3.0%. Industrial production shrank 0.8% y/y in October, down from 0% and below the -0.1% the market expected.
The GBP/EUR exchange rate dropped to 1.1618, having been at 1.1640 ahead of the release. The Pound to Dollar exchange rate went from 1.2552 to 1.2528.
The soft data will encourage markets to bet the Bank of England will be primed to cut interest rates on a number of occasions in 2024, weighing on UK bond yields and the Pound.
Following Tuesday's softer-than-expected UK wage numbers, markets are fully priced for a June rate cut, having been priced for the first cut to come in August at the start of the week.
The Bank of England will keep interest rates unchanged on Thursday and repeat the message it is too soon to consider interest rate cuts, which can put a floor under the Pound.
While disappointing, the ONS economic growth data is backwards-looking and confirms a soft patch for the economy.
What will likely be of more interest to markets is Friday's PMI survey data for December, as these will give a more accurate update on conditions and determine how the Pound trades into the weekend.
An original version of this article can be viewed at Pound Sterling Live
