Pound Sterling Dips Against Euro and Dollar on Weak UK GDP

July 11, 2025 - Written by Ben Hughes

STORY LINK Pound Sterling Dips Against Euro and Dollar on Weak UK GDP

The Pound to Dollar (GBP/USD) exchange rate dipped to just below 1.3540 from above 1.3560 with the Pound to Euro (GBP/EUR) exchange rate back below the 1.1600 level from 1.1615.

UK GDP contracted 0.1% for May compared with consensus forecasts of 0.1% growth for the month and followed the April decline of 0.3%.

The services sector disappointed expectations with only a 0.1% gain for the month. There was also a 0.9% contraction for industrial production while construction output declined 0.6%.

Liz McKeown, director of economic statistics at the ONS, commented; “The economy contracted slightly in May with notable falls in production and construction only partly offset by growth in services.”

She added; “May’s fall in production was driven by oil and gas extraction, car manufacturing and the often-erratic pharmaceutical industry.”

The manufacturing sector was hurt by a sharp decline in pharmaceutical output.

March GDP growth was revised to 0.4% from 0.2% previously and the economy posted 0.5% growth in the three months to May.


Raymond James Investment Services European strategist Jeremy Batstone-Carr commented; “April’s GDP reversal provided clear evidence that there has not been a sustained improvement in economic activity, reinforced by yet another downbeat month which leaves the economy on track for a shallow contraction once June’s data sees the end of Q2.”

The data will trigger fresh reservations surrounding the underlying growth path which will tend to undermine Pound sentiment.

The data will also reinforce market concerns surrounding the fiscal outlook as weaker growth will tend to curb tax revenue and put further upward pressure on the borrowing requirement.

ING is very confident that taxes will have to be increased in the Autumn and notes that the government has no easy options in looking to boost revenue.

ING also noted wider implications; “This story matters not just for the Treasury, but is key for the Bank of England too. If we see this pace of job losses accelerate over the next couple of readings, we think the BoE will have to seriously consider speeding up the pace of rate cuts.”

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TAGS: Pound Sterling Forecasts