The pound is rocketing against the dollar and the euro after stronger than expected GDP growth

Emma Haslett
Follow Emma
The pound was up 0.9 per cent against the dollar (Source: Getty)

The pound shot up against both the dollar and the euro after healthier-than-expected UK growth figures pushed up expectations of an interest rate rise.

Sterling was up 0.9 per cent against the dollar, at $1.3249, in late morning trading, and 0.8 per cent higher against the euro, at €1.1251.

The jump followed the publication of official data showing the UK's GDP grew 0.4 per cent in the third quarter, against expectations of 0.3 per cent, and up on the second quarter's 0.3 per cent. The figure was shored up by the manufacturing sector, which returned to growth after a weak second quarter.

The figure was enough to push economists to speculate the Bank of England's monetary policy committee will vote in favour of an interest rate rise next month.

"There was no ambiguity from the pound this Wednesday, with the currency making it clear how it felt about the UK’s preliminary third quarter GDP reading," said Connor Campbell, financial analyst at Spreadex.

"If investors are to be believed it’s sufficiently hawkish enough to nudge the Bank of England towards an early November rate hike."

"The only hope for those that believe it would be a mistake to raise interest rates given the uncertain economic outlook, is the fact that not all policy makers are behind such a move," added Craig Erlam, senior market analyst at Oanda.

"With inflation having not risen above three per cent last month, there is a possibility that policy makers wait a little longer before taking the decision.

"That said, the central bank could come in for some criticism if it doesn’t follow through on warnings now, with market having now priced in an 83 per cent chance of a hike next week."

Read more: It’s time to question the macroeconomic orthodoxy on inflation

Related articles