GBP Struggles as Weak UK GDP Data Fuels Rate Cut Expectations

GBP Weakens as UK GDP Miss Triggers BoE Rate Cut Speculation

The British Pound (GBP) is slightly underperforming in Thursday's trading session following a disappointing UK GDP report for April, adding pressure on the currency amid rising expectations of a Bank of England (BoE) rate cut.

UK GDP Contracts in April

Official data revealed that UK GDP shrank by 0.3% month-on-month, a figure worse than the -0.1% forecast. Analysts note that the drop, while not entirely surprising, adds to a broader pattern of volatility seen in recent months.

“Manufacturing strength in February created a frontloaded effect, which is now unwinding,” one market economist commented.

There is also growing scepticism around the seasonal adjustments in the data, with first halves of recent years performing better than second halves. Based on this pattern, Q2 UK GDP may only grow by 0.1% to 0.2%, down from 0.7% in Q1.

BoE Rate Cut Speculation Intensifies

This weak GDP print comes shortly after softer wage growth data earlier in the week. Combined, they present a case for the BoE to start easing monetary policy sooner than expected, contrasting with the European Central Bank (ECB), which is largely done cutting rates.

“The rate spread story now favors the Euro,” analysts say. “We could see EUR/GBP climb towards 0.8550 and potentially 0.8600 over the coming months.”

EUR/GBP: Technical Upside Potential

Currently hovering near 0.8500, the EUR/GBP pair is gaining traction from the macro divergence between the Eurozone and the UK. If the BoE signals a shift in policy tone at upcoming meetings, a breakout towards 0.8550–0.8600 seems increasingly probable.

Explore More on Tredu:

• BoE Policy Tracker: When Is the Next UK Rate Cut?
• EUR/GBP Forecast: Technical and Fundamental Insights
• UK Economic Dashboard: GDP, Inflation & More