Pound Sterling Firms as UK GDP Beats Forecasts

Modified: Thursday, 14 August 2025 14:30 BST - Written by David Woodsmith

STORY LINK Pound Sterling Firms as UK GDP Beats Forecasts

Pound Sterling held firm against the Euro and US Dollar on Thursday after the UK economy expanded faster than expected in the second quarter, though analysts cautioned that the composition of growth raises questions about its durability.

The Pound to Euro exchange rate (GBP/EUR) stood at 1.16201 (+0.18%), while GBP/USD traded at 1.35762 (-0.07%) and GBP/CHF at 1.09436 (+0.09%).

The Office for National Statistics reported GDP rose 0.3% quarter-on-quarter, above the 0.1% expected by markets. James Smith at ING said that “at face value, the UK's 0.3% second-quarter growth performance looks reasonable… but much of the growth was generated by government consumption… something that isn’t indicative of underlying economic performance.” He added: “It’s worth not reading too much into these figures – and the Bank of England certainly isn’t doing that.”

June’s output rose 0.4% month-on-month, beating consensus forecasts. Elliott Jordan-Doak at Pantheon Macroeconomics called it “above-consensus… adding to the already-hawkish newsflow this week” and argued that “GDP rose by a full percentage point in H1… illustrating the economy’s resilience to a barrage of shocks.” However, he noted that “private consumption grew just 0.1%… and business investment dropped sharply.”

Lloyds Bank echoed concerns over the quality of growth, saying “almost all of it… can be explained by government consumption” and warning that “weak household consumption and business investment doesn’t indicate strong underlying demand in the private sector.”

Smith at ING also flagged risks for the rest of the year: “We certainly expect the GDP figures in the second half of the year to have a weaker flavour to them. The jobs market is under pressure… and investment intentions are lower.” Jordan-Doak added that “we expect to see a rebound in Q3 as trading conditions normalise and the MPC’s interest rate cuts feed into activity,” though much will depend on incoming inflation and labour market data.

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TAGS: Pound Sterling Forecasts