EUR/GBP softens to near 0.8600 on upbeat UK GDP data
- EUR/GBP weakens to near 0.8615 in Thursday’s early European session.
- UK preliminary GDP grew 0.3% QoQ in Q2 2025, stronger than expected.
- A higher-for-longer view on ECB rates might cap the EUR’s downside.
The EUR/GBP cross loses ground to around 0.8615 during the early European session on Thursday. The Pound Sterling (GBP) strengthens against the Euro (EUR) after the release of UK Gross Domestic Product (GDP) data. The attention will shift to the preliminary reading of the GDP report for the second quarter (Q2) from the Eurozone, which is due later on Thursday.
Data released by the Office for National Statistics (ONS) on Thursday showed that the UK economy grew 0.3% QoQ in the second quarter of 2025, compared to a 0.7% growth in the first quarter. This figure came in better than the estimation of a 0.1% increase in the reported period.
Meanwhile, the UK GDP expanded 1.2% YoY in Q2 versus 1.3% prior. This reading was above the market consensus of 1.0%. The monthly UK GDP arrived at 0.4% in June, following a 0.1% decline in May, stronger than the 0.1% expected. The GBP attracts some buyers in an immediate reaction to the upbeat UK GDP data.
On the Euro front, investors are increasingly pricing in a "higher for longer" interest rate environment from the European Central Bank (ECB), which could help limit the shared currency’s losses. Forward contracts on the ECB's official overnight benchmark interest rate, the euro short-term rate (ESTR), imply around a 60% odds of a 25 basis points (bps) rate reduction by March and a deposit rate of 1.92% in December 2026.
GDP FAQs
A country’s Gross Domestic Product (GDP) measures the rate of growth of its economy over a given period of time, usually a quarter. The most reliable figures are those that compare GDP to the previous quarter e.g Q2 of 2023 vs Q1 of 2023, or to the same period in the previous year, e.g Q2 of 2023 vs Q2 of 2022. Annualized quarterly GDP figures extrapolate the growth rate of the quarter as if it were constant for the rest of the year. These can be misleading, however, if temporary shocks impact growth in one quarter but are unlikely to last all year – such as happened in the first quarter of 2020 at the outbreak of the covid pandemic, when growth plummeted.
A higher GDP result is generally positive for a nation’s currency as it reflects a growing economy, which is more likely to produce goods and services that can be exported, as well as attracting higher foreign investment. By the same token, when GDP falls it is usually negative for the currency. When an economy grows people tend to spend more, which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation with the side effect of attracting more capital inflows from global investors, thus helping the local currency appreciate.
When an economy grows and GDP is rising, people tend to spend more which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold versus placing the money in a cash deposit account. Therefore, a higher GDP growth rate is usually a bearish factor for Gold price.
Author
Lallalit Srijandorn
FXStreet
Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.
