UK Economy Shrinks, Pound Falls Amid Rate Cut Speculation

The British pound fell sharply after data revealed an unexpected contraction of 0.1% in the UK's GDP for October, contrary to forecasts of a 0.1% increase. This marks the first back-to-back decline since the COVID-19 pandemic, leading to speculation about potential rate cuts by the Bank of England in 2025. The pound dropped as much as 0.43%, trading at $1.2635, while also declining 0.4% against the euro, indicating challenges amid rising inflation and economic uncertainty. Analysts predict that the Bank of England may need to act swiftly to mitigate further economic slowdown, despite expectations of an unchanged interest rate at their upcoming meeting. Meanwhile, the US dollar strengthened, bolstered by positive PPI data and a dovish rate cut from the European Central Bank, highlighting a widening gap in economic performance between the two regions. Both the UK and Eurozone face significant economic challenges, complicating the outlook for their currencies.