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UK GDP recorded a 0,7% increase in Q1, beating forecasts of a 0.6% rise.
Initial data showed the British economy grew by 0.7% in the first three months of 2025, its strongest performance since the same period in 2024. The annualised growth rate registered 1.3% in Q1, modestly exceeding the majority of forecasts.
GBP/EUR was unmoved in early trading by this morning’s news, but the pound did open higher against the US dollar. With growth fuelled by services output, machinery manufacturing and a noteworthy boost to exports and imports, the next few months will provide an interesting barometer of how trade tariffs are affecting the UK economy.
Currency markets were fairly quiet on Wednesday in the absence of much economic data. GBP/EUR and GBP/USD ranged by only a fraction, although the euro did enough to record a minor daily improvement over both the pound and the US dollar.
Catherine Mann, one of two Bank of England policymakers who last week voted for a 50bps cut to interest rates, yesterday urged companies not to increase prices to rebuild their profit margins, warning “greedflation” could hit growth. “I need to see that firms are starting to be much more moderate in setting their prices” before she voted for another cut, Mann said.
Chinese officials criticised the recent trade deal between the UK and the USA, in a sign of how the ongoing trade war is pitting economies indirectly against one another. According to Beijing, the agreement gives British goods an artificial advantage over their Chinese equivalents.
However, a recent softening in US trade policy was enough for Goldman Sachs to raise its growth forecasts for both the UK and the eurozone. Analysts increased their cumulative growth forecasts for both economies by a couple of percentage points and predicted more rate cuts were on the horizon.
Iconic fashion brand Burberry is considering cutting almost 2000 jobs globally, threatening several hundred British jobs at its factory in Yorkshire. Burberry recently reported a whopping 117% drop in its pre-tax profits in the last financial year, equivalent to a £66mn loss.
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GBP: Slipping into Thursday
Sterling shed some value to its rivals yesterday ahead of this morning’s big growth report. Despite some softness in recent employment figures and a cut to interest rates, cautious words from the Bank of England helped limit those losses to below half a cent.
GBP/USD: the past year
EUR: Taking the slow road
As other nations push and shove to get to the front of the queue, the eurozone is taking a different approach to trade negotiations. Yesterday, Reuters reported that the bloc was confident its size could give it an edge and allow it to negotiate a more complete set of rules compared to the UK, for example. With $1.7 trillion in activity at stake, the euro faces a nail biting wait ahead of the deadline.
GBP/EUR: the past year
USD: Disappointing dollar bounce
The US dollar has been unable to capitalise on recent softening in the trade war. Despite a minor bounce, markets are playing it cool ahead of today’s comments from Jerome Powell. As highlighted by Deutsche Bank yesterday, a combination of government policy and falling foreign investment make it hard to bet on USD in the short term.
EUR/USD: the past year
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