Despite underwhelming economic data from the United Kingdom, the British pound performed well on Thursday across global markets. Temporary easing of certain geopolitical risks pushed capital out of the U.S. dollar, which was further weakened by the release of the Federal Reserve’s Beige Book. Meanwhile, Poland’s core inflation data is due today, but the złoty (PLN) continues to be driven mainly by overall market sentiment.
Weak Economy, Strong Pound?
The latest macroeconomic readings from the UK once again failed to impress. Although the August GDP growth rate of 1.3% looks relatively solid compared to other developed European economies, the underlying numbers are less encouraging. Industrial production and manufacturing output both declined year-on-year by 0.7% and 0.8%, respectively. On a positive note, both indicators rose month-on-month—by 0.4% and 0.7%, beating forecasts.
However, one strong month does not change the broader picture of a gradually slowing British economy. The new data reinforces expectations for the Bank of England to cut interest rates, with markets currently pricing in a full rate cut by March 2026. Interestingly, despite weak data, the pound strengthened against major currencies. By noon, GBP/USD reached 1.135, its highest level in nearly 10 days, while EUR/GBP fell to 0.867. The Polish złoty also weakened slightly under the pressure of the stronger sterling, with GBP/PLN testing the 4.90 level.
EUR/USD Above 1.165 as USD Weakens
By early Thursday afternoon, markets showed signs of stabilization. European equities were mixed, with Paris’s CAC 40 leading gains—up nearly 0.8%—while most other major indices hovered near Wednesday’s closing levels. France has been cited as one of the key reasons for the euro’s recent strength, with political risks expected to ease in the short term.
Prime Minister Sébastien Lecornu is set to survive a no-confidence vote in parliament, following an agreement with the Socialists, who secured a delay to the controversial pension reform in return for their support.
Across the Atlantic, the U.S. dollar found little relief. The Federal Reserve’s Beige Book, a summary of economic conditions distributed to FOMC members two weeks before their policy meeting, reportedly suggested that policymakers remain open to a rate cut by the end of the month, despite limited new macro data due to the U.S. government shutdown.
As a result, EUR/USD climbed more than a cent above Tuesday’s levels. After breaking a local resistance near 1.165, the pair lost momentum, suggesting that the market may have already priced in these factors and is now awaiting new catalysts.
Trade Tensions Persist, While PLN Remains Steady
While official U.S. economic data remain scarce, trade war tensions are intensifying. The situation is expected to come to a head later this month, when U.S. and Chinese leaders could meet during the Asia-Pacific Economic Cooperation (APEC) Summit in South Korea. Washington is reportedly seeking to ease tensions, with Treasury Secretary Scott Bessent hinting at an extension of tariff suspensions (due to expire on November 10) in exchange for Beijing withdrawing its restrictions on the export of rare earth metals. Meanwhile, the European Union is also considering retaliatory measures against China for the same reason.
In Poland, attention turns to the National Bank of Poland’s (NBP) release of core inflation data, which excludes volatile categories such as food and energy. Core CPI is expected to come in at 3.1% year-on-year, which would mark the lowest level since December 2019. Even if the reading deviates slightly from expectations, the market reaction is likely to be limited.
The Polish złoty, along with other Central European currencies, continues to trade firmly, reflecting improved market sentiment. Before 1:00 p.m., EUR/PLN hovered around 4.25, while USD/PLN remained below 3.65.
Source: ceo.com.pl – UK Economy Slows, but the Pound Holds Strong as the USD Loses Momentum
