March 14, 2025 – Written by Tim Boyer
STORY LINK Pound Falls Against Euro and Dollar as UK GDP Data Undermines Sterling
Weaker-than-expected GDP data undermined Pound confidence on Friday. Equity markets were stronger on the day, but Sterling still posted net losses.
The Pound to Dollar (GBP/USD) exchange rate retreated to 1.2930 from 1.2950 with the Pound to Euro (GBP/EUR) exchange rate dipping to just below 1.1900 from 1.1935.
The ONS reported that UK GDP contracted 0.1% for January after 0.4% growth for December and compared with consensus forecasts of 0.1% growth.
Industrial production declined 0.9% on the month with a 1.5% annual decline.
Construction output declined 0.2% for the month which was offset by a slight 0.1% expansion in services.
Retail sales were firm, but there was a significant downturn in accommodation and food services.
ING commented; “Don’t be distracted by volatility in the monthly GDP numbers, because despite a surprise fall in January’s economic output, higher government spending should lead to reasonable growth through 2025. Whether that’s enough to avert tough decisions for the Treasury, we’re not so sure.”
JPMorgan economist Allan Monks commented; “This release leaves weaker growth momentum in place at the start of this year, but first-quarter GDP should still print positively.”
The bank expects that government spending will boost the economy in the short term.
Nevertheless, it added; “There is, however, more of a concern about the underlying health of the private sector.”
The data will increase the pressure on fiscal policy ahead of the March 26th budget.
ING added; “The problem for the Treasury is that its independent forecaster, the Office for Budget Responsibility, has been far too optimistic on 2025 growth. Its 2% forecast looked wildly optimistic even when it was announced back in October. The truth is likely to be more like half that.”
According to Hailey Low, associate economist at the National Institute of Economic and Social Research; “It is crucial that the upcoming spring statement provides stability rather than adding to domestic uncertainty. Frequent policy U-turns risk undermining business and investor confidence at a time when clarity and consistency are most needed.”
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