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GBP/USD eases from multi-year highs as market digests mixed UK macro data

  • GBP/USD edges lower as traders digest mixed UK macroeconomic data.
  • UK Q1 GDP growth confirmed at 0.7%, but real household income drops sharply.
  • Current Account deficit widens more than expected, adding pressure to the British Pound.

The British Pound (GBP) weakens against the US Dollar (USD) on Monday as mixed UK economic data weighs on the Sterling despite a generally subdued Greenback. The GBP/USD pair experiences slight selling pressure after the release of GDP Q1 figures, declining from near its multi-year high as investor sentiment turns cautious. Traders reposition ahead of key macroeconomic events, seeking clearer signals on the UK’s growth outlook and the Federal Reserve’s (Fed) policy stance.

The GBP/USD pair is drifting lower, trading around 1.3685 at the time of writing during the American trading hours, down over 0.20% on the day. Despite the recent pullback, the pair remains within reach of its multi-year peak near 1.3770, which was touched on Thursday, with the broader uptrend still intact for now.

UK economic data released earlier on Monday showed that the British economy expanded by 0.7% in the first quarter, matching the preliminary estimate and marking the strongest quarterly growth in a year. On an annual basis, Gross Domestic Product (GDP) rose 1.3%, also in line with the initial estimate and unchanged from the growth rate seen in Q4 2024.

However, the underlying details were less encouraging — real household disposable income slumped 1.0%, the sharpest drop since early 2023, as rising prices and tax burdens eroded consumer purchasing power. The household saving ratio also fell to 10.9% from 12.0%, reflecting a drawdown in savings to sustain spending.

Adding to the cautious tone, the UK’s current account deficit widened to £23.46 billion in Q1, up from £21.03 billion in the previous quarter and significantly above market expectations of a £19.7 billion shortfall.

Despite these headwinds, the Pound continues to draw modest support from the Bank of England’s (BoE) cautious policy stance, with officials remaining reluctant to begin rate cuts amid persistent inflationary pressure, particularly in the services sector. This divergence from more dovish signals by other major central banks has helped cushion the downside in GBP/USD in recent weeks.

That said, the Monetary Policy Committee (MPC) faces a delicate balancing act. While a firmer currency may help ease imported inflation, the sustained high cost of borrowing poses risks to growth and household spending. Future policy decisions will depend heavily on incoming data — especially wage growth, service inflation, and labor market conditions — as the BoE aims to return inflation to its 2% target without deepening the economic slowdown.

Author

Vishal Chaturvedi

I am a macro-focused research analyst with over four years of experience covering forex and commodities market. I enjoy breaking down complex economic trends and turning them into clear, actionable insights that help traders stay ahead of the curve.

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