- UK GDP grew by 0.5% in February 2025, exceeding forecasts and showing the strongest growth in 11 months.
- The US Dollar Index (DXY) fell significantly, reaching July 2023 lows.
- GBP/USD broke above the 1.3000 handle due to US Dollar weakness, with potential further gains depending on US dollar and tariff developments and upcoming UK data.
UK GDP was released this morning and showed the British economy grew by 0.5% in February 2025, bouncing back from a flat performance in January and beating forecasts of a 0.1% rise. This was the strongest growth in 11 months.
Industrial production jumped 1.5%, recovering from a 0.5% drop in January, thanks to a 2.2% increase in manufacturing. Notably, production of computers, electronics, and optical products rose sharply by 9.8%, while pharmaceuticals grew by 4.4%. Utilities went up by 2%, but mining fell by 3%.
The services sector grew by 0.3% after a 0.1% gain in January, driven by computer programming (up 2%), telecommunications (up 3.5%), and publishing (up 6.4%). Construction increased by 0.4%, bouncing back from a 0.3% drop, led by public works and repairs.
Looking at the quarter ending in January, the economy expanded by 0.6%.
UK GDP - More Noise Than Substance?
Monthly GDP data can be more noise than an accurate indicator. Last year, two strong months made up most of the growth in 2024, which seems unrealistic.
That said, the latest figures suggest there might be too much pessimism about the near-term outlook. Tariffs are a challenge, but their impact on UK producers is less direct. Instead, they could affect the UK through their effect on the US economy.
If US demand drops, it will eventually impact the UK. However, for now, the UK government’s big spending increase this year might provide some stability. Despite talk of spending cuts, real departmental spending is set to rise by 4% next year. Much of this will go towards wages, which should help support the economy.
Next week is a big week for the UK, with wage data and inflation data on the agenda. Jobs data will be key in the coming months and next week will provide market participants with another glimpse at the data.
In response to the data, the UK Chancellor of the Exchequer called the GDP data ‘encouraging’. The response from markets saw traders trim BoE bets after the data, with 85bps more cuts expected in 2025.
US Dollar Index (DXY) Hits 2023 Lows
Source: TradingView
The US dollar continued its fall on Friday as worries about the U.S. economy led investors to move away from U.S. assets and put their money into safer options like the Swiss franc, yen, euro, and gold.
The US Dollar Index sank as much 1.45% trading at a low of 99.44 which is a July 2023 low. This has seen a host of currencies gain ground against the Greenback with Cable being no exception.
Technical Analysis - GBP/USD
GBP/USD has been on a tear since the Monday low around the 1.2700 handle.
The move has largely been facilitated by US Dollar weakness rather than GBP strength and that has continued today as the DXY breached the psychological 100.00 barrier.
The weakness in the US Dollar has allowed GBP/USD to break above the 130.00 handle with the 2025 highs now in sight.
Further bullish moves may largely depend on the US dollar and tariff developments as markets wait on UK data next week.
Immediate resistance rests at previous highs around the 1.3200 handle, with the 1.3250 and 1.3400 levels up next.
A pullback for cable will bring the 1.3000 level back into focus before the 1.2864 and 1.2700 handles come into focus.
GBP/USD Daily Chart, April 11, 2025
Source: TradingView.com
Support
- 1.3000
- 1.2864
- 1.2700
Resistance
- 1.3200
- 1.3250
- 1.3400