Sterling Soars as UK GDP Beats Expectations and Dollar Rally Pauses

Sterling traded higher on Wednesday as the UK's GDP beat expectations and a pause in the dollar's rally supported the pound. The GBP/USD rose by 0.31% to $1.3271, while the EUR/USD gained 0.11% to $1.1354.

The strong economic data from the UK, with a 0.5% growth in the second quarter beating forecasts of 0.4%, weighed on the dollar's rally. ING FX strategist Francesco Pesole noted that rising back-end yields continue to affect global risk sentiment and may prevent a material correction in the dollar.

The US is expected to release ADP payrolls and August PCE data, with core PCE seen up 0.3%. A stronger reading could lift October hike pricing for the Fed, which ING expects to hike next in December. However, Pesole warned that a hot US data report combined with a Fed hike in October could send EUR/USD plummeting to 1.10.