Sterling is rallying sharply today as UK domestic data challenge expectations of a smooth cooling in demand. The catalyst appears to be November consumer credit data from the BoE, which showed borrowing rose by GBP 2.08B, the largest monthly increase in two years and stronger than any economist forecast.
Annual growth in consumer credit also accelerated to 8.1%, from 7.5% previously. Credit card borrowing surged 12.1%, while other consumer credit expanded 6.3%, highlighting robust appetite for spending rather than precautionary retrenchment, even before the government’s Autumn Budget.
Elevated borrowing, especially via credit cards, points to consumer demand holding up more firmly than anticipated, keeping services inflation under upward pressure — the very area where the BoE has struggled to secure sustained disinflation progress.
That backdrop strengthens the case for caution at the February policy meeting. The data give hawkish members of the Monetary Policy Committee justification to push for a hold, at least until post-holiday spending data confirms whether momentum is truly fading.
Technically, Sterling strength is driving EUR/GBP lower, with downside momentum accelerating toward the 0.8618–0.8631 support zone (38.2% retracement of 0.8221 to 0.8663 at 0.8618). A clean break there would signal that the rebound from the 2024 low at 0.8221 has already run its course as a corrective move, shifting the near-term outlook decisively bearish.
In GBP/CHF, today’s bounce argues that support near the 55-day EMA and above 1.0594 has held decisively. That keeps the rebound from 1.0362 alive, with a retest of 1.0759 likely soon. Sustained break higher would target 38.2% retracement of 1.1675 to 1.0362 at 1.0864, even still as a corrective move.
