The pound gained as the U.K.'s final GDP growth print for the third quarter exceeded preliminary and market estimates.
The U.K. economy expanded 0.4% in the three months to September on a quarterly basis, higher than the growth rate projected earlier and the Econoday consensus estimate, both at 0.3%.
The economy rebounded from a 0.2% contraction in the second quarter, avoiding a technical recession amid Brexit uncertainty, data from Office for National Statistics showed.
The services sector was the strongest contributor to growth, rising 0.5%, while production and construction sectors also contributed positively, the body noted. Household expenditure rose 0.3% while gross fixed capital formation increased 0.2%.
On an annual basis, GDP grew 1.1% in the third quarter, 0.1 percentage point higher than previously estimated, compared to a revised 1.2% annual expansion seen in the prior three-month period.
The body also revised GDP growth between 2017 and 2018 to 1.3% from 1.4%.
The pound climbed 0.3% against the dollar as at 10:27 a.m. in London following the release.
In the monetary policy meeting held Dec. 19, the Bank of England held its key rates at 0.75% but lowered its growth forecast for the fourth quarter to 0.1% from previously estimated 0.2%.
"If global growth fails to stabilize or if Brexit uncertainties remain entrenched, monetary policy may need to reinforce the expected recovery in U.K. GDP growth and inflation," the BoE stated. The central bank added it may also raise rates at a "gradual pace" and to a "limited extent" to maintain inflation sustainability if the economy picks up as expected.
Following the Conservative Party's win in the Dec. 12 elections, S&P Global Ratings revised the outlook on the U.K. to stable from negative, while Fitch Ratings removed the country from Rating Watch Negative, on the assumption that the risk of a "disruptive" no-deal Brexit would be reduced.