GBP/USD rises on GDP data

Today’s headlines

What’s happening: The British pound gained versus the US dollar on Thursday following the release of UK’s GDP data showing growth in the economy.

What happened: The latest GDP report came in-line with market estimates, easing some pressure on Finance Minister Rachel Reeves before the release of the government’s budget next month.

Weakness in the US dollar lent further support to the GBP/USD forex pair on Thursday.

Why it matters: Data released on Thursday showed that the UK economy expanded by 0.1% in August, following a 0.1% contraction in the previous month. Growth was driven by the manufacturing sector, while services activity came in flat for the second month in a row.

On an annualised basis, UK’s GDP grew by 1.3%, which is not sufficient to offset the need for higher tax. Finance Minister Rachel Reeves recently indicated that she is looking to increase taxes and lower spending.

Other data showed industrial production in the UK surged by 0.4% in August, following a 0.4% decline in the previous month. The figure topped market estimates of a 0.2% gain. The UK trade deficit widened to £3.39 billion in August, from £3.02 billion in the previous month. This marked the largest deficit since March.

There were some speculations of the Bank of England cutting interest rates by 25 bps at its December meeting. Mostly expectations are for the BoE to cut rates early next year. Investors widely expect central bank policymakers to cut interest rates by more than 50 bps by the end of 2026.

The US dollar recorded losses for the third straight session, amid rising tensions between the US and China. Weakness in the US dollar provided further boost to the GBP/USD pair. The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell more than 0.3% to 98.34 on Thursday.

The GBP/USD forex pair gained around 0.3% at 1.3438 on Thursday, after surging to 1.3443 earlier in the session, its highest level since October 7.

London’s FTSE 100 gained 0.12% to close at 9,436.09, while the domestically focused FTSE 250 slipped 0.13% to settle at 21,991.36 on Thursday.

What to watch: With no major economic releases today, investors await UK’s report on inflation rate on Wednesday. The UK’s annual inflation rate is expected to accelerate to 4% in September, from 3.8% in August. The annual core inflation rate is projected to accelerate to 3.7%, from 3.6% in the previous month.

The markets today

TSMC in focus today following the release of quarterly results

Context: Taiwan Semiconductor Manufacturing Co reported 39.1% growth in its third-quarter net profits, topping market expectations.

Details: The world’s largest contract chipmaker reported better-than-expected quarterly earnings, driven by higher demand for semiconductors used in AI applications.

TSMC, whose customers include Apple, Broadcom and Nvidia, said its net profits jumped to $14.76 billion in the latest quarter, beating market estimates by a wide margin.

TSMC reported sales of $33.1 billion, topping analyst expectations of $32.07 billion. The company’s earnings came in at $2.92 per share, ahead of consensus estimates of $2.63 per share.

Its gross margins expanded by 170 basis points to 59.5%, beating the company’s guidance of 55.5% to 57.5%.

The company’s board approved a dividend of 5.00 New Taiwanese dollars for the second quarter.

Management guided to revenue of $32.2-$33.4 billion for the current quarter, higher than market estimates of $31.55 billion.

How shares responded: TSMC’s shares fell 1.6% to close at $299.84 on the US stock exchange on Thursday. The stock has jumped more than 14% over the past month.

What to watch: Investors will continue monitoring surging demand for AI chips and competition from US chipmakers. Markets will also watch the trade tensions between US and China.

Other Markets: European indices closed higher on Thursday, with the DAX 40, CAC 40 and STOXX Europe 600 Index up by 0.38%, 1.38% and 0.69%, respectively.

The news shaping the markets

US President Donald Trump announced plans to meet Russia’s President Vladimir Putin in Budapest in a bid to end the ongoing war in Ukraine. The news sent the RUB/USD pair lower in forex trading this morning.

Singapore’s non-oil domestic exports jumped 6.9% year-over-year in September. This marked a rebound from the 11.5% contraction in the previous month, which lent support to the SGD/USD forex pair.

Indonesia’s foreign direct investment, excluding investments in the financial and oil & gas sectors, dipped by 8.9% year-over-year to IDR 212 trillion in the third quarter, which sent the IDR/USD pair lower in forex trading this morning.

US crude oil inventories jumped by 3.524 million barrels in the week ending October 10. This following a gain of 2.78 million barrels in the previous week exerted pressure on WTI crude oil prices.

South Korea’s unemployment rate eased to 2.5% in September from 2.6% in the previous month. However, the KRW/USD pair fell in forex trading this morning.

What else to watch today

Eurozone’s inflation rate (1300 UAE Time), India’s bank loan growth (1530 UAE Time), deposit growth (1530 UAE Time) and foreign exchange reserves (1530 UAE Time), Canada’s foreign securities purchases (1630 UAE Time), as well as US Baker Hughes oil rig count (2100 UAE Time) and Baker Hughes total rigs count (2100 UAE Time).