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GBP/USD rises after the UK economy returns to growth

• UK GDP rose 0.1% MoM in August
• USD slips on Fed rate cut expectations
• GBP/USD tests the rising trendline resistance

GBP/USD is rising amid a weaker U.S. dollar, as data showed the UK economy returned to growth in August, albeit marginally.

Data showed that the UK economy grew 0.1% MoM in August after falling 0.1% in July, which could offer some relief to Chancellor Rachel Reeves as she prepares for her budget in November.

According to the International Monetary Fund, the UK economy is on track to have the second-fastest growth among G7 nations in 2025 after the US. However, that 1.3% growth is not enough to avoid the need for tax increases in the November budget.

Recent PMI data have suggested that after a strong summer, confidence and momentum faded in September due to concerns over the potential budget implications. The economy's regaining momentum hinges on restoring business confidence and reducing uncertainty.

Today's data followed earlier figures that showed unemployment at its highest level in over 4 years, rising to 4.8%.

Meanwhile, the US dollar is slipping lower as investors continue to weigh up the US-China trade tensions and as Federal Reserve rate cut expectations ramp up following Powell's speech earlier in the week.

The markets are pricing in a 93% probability of two rate cuts before the end of the year.

However, the Federal Reserve is now in its blackout, which, combined with a lack of U.S. data owing to the ongoing government shutdown, means investors will be lacking fresh catalysts.
 

GBP/USD forecast- technical analysis

GBP/USD fell away from its mid-September high of 1.3725, falling below its rising trendline and 1.3350 support zone to a low of 1.3250. The hammer candlesticks hint at a bullish reversal, and the price has recovered above 1.34.

Buyers will look to extend the recovery above the rising trendline resistance at 1.3440 to bring 1.36 and 1.37 into focus.

Immediate support is evident at the 1.3350 zone, with 1.3250 coming into play below.
 

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DAX slips amid trade jitters & ahead of Lagarde’s speech

• US-China trade war jitters linger
• ECB President Lagarde will speak later
• DAX tests trendline support

European stocks open mixed on Thursday as choppy trading continues. While the FTSE is down around 1%, the DAX is falling 0.3% and the French CAC is down 0.2%.

The mood remains cautious as investors continue to weigh up escalating China-U.S. trade tensions. Rhetoric between the two sides has been ramping up, with Trump declaring a trade war with China. Although Treasury Secretary Scott Bessent has played this down, saying it could all be resolved in a meeting between the two leaders later this month in South Korea.

Interestingly, the latest trade measures are scheduled to take effect in November after Trump and Xi meet. This could mean that some of last week's measurements may be toned down or unwound if the meeting is successful.

On the data front, attention will be on the eurozone trade balance and a speech by ECB president Christine Lagarde later today.

Christine Lagarde has previously said that the central bank sees the economy in a good place; however, she can't declare an end to interest rate cuts just yet.

The IMF published new forecasts and sees GDP rising 1.2% this year and 1.1% in 2026, largely in line with the ECB's projections.
 

DAX forecast - technical analysis

The DAX hit a record high of 24,775 in early October before easing back. The price is testing the rising trendline support at 24,000, as well as the 50 SMA. The RSI is neutral.

Should the support hold, buyers will look to rise back towards 24,775 to reach fresh record highs.

Should sellers break below 24,000, this brings 23,350 support into focus. Below here, sellers could gain traction.

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