UK GDP impresses with 0.7% gain in Q1

Kenny Fisher MarketPulse

The British pound has edged lower at the start of the week. GBP/USD is trading at 1.3689 down 0.19% in the North American session.

UK GBP for Q1 higher than expected

The UK economy grew by 0.7% q/q, unchanged from the initial estimate. This follows a gain of 0.1% in Q4 2024 and marked the strongest growth in a year. The gain was driven by strong growth throughout the economy, including a 0.7% gain in the services sector.

The strong GDP report is very welcome news for the UK government, as their have been warnings of economic doomsday due to the government's tax-and-spend policy. Finance Minister Reeves will be able to silence her critics, as the 0.7% GDP gain was the best in the G-7.

Still, Reeves may not be out of the woods just yet. Much of the economic strength in the first quarter could be a result of companies rushing to spend before US President Trump's tariffs took effect in April. There are concerns that the Q1 GDP is a one-time blip and that growth will taper off in the coming quarters.

The Bank of England remains concerned about the UK economy, although today's positive GDP will be welcome news. The Bank held the cash rate at 4.25% last week as inflation remains stubbornly high. The BoE said that underlying growth was "weak" and it's clear that the Bank would like to boost the economy with a rate cut but can't do so until inflation shows signs of easing.

US PCE declines by 0.1%

The US continues to show signs that the economy is slowing down. GDP was revised down to -0.5% in the first quarter. US consumer spending for May (PCE) recorded a 0.1% decline, following a 0.2% gain in April and shy of the consensus of 0.1%. This was the first contraction since January. If economic data continues to head lower, pressure will increase on the Federal Reserve to lower interest rates, which isn't expected before September.

GBP/USD technical

GBP/USD is putting pressure on support at 1.3682. Next, there is support at 1.3665
There is resistance at 1.3712 and 1.3729

GBPUSD 1-Day Chart, June 30, 2025

Author

Kenny Fisher

MarketPulse

A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities.

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