Pound Slides On Weak U.K. GDP Data

(RTTNews) - The British pound weakened against other major currencies in the European session on Thursday, as U.K. economy shrank more than expected in April largely reflecting a fall in services output.

Data from the Office for National Statistics showed that the U.K. real gross domestic product declined 0.3 percent month-on-month in April, following a growth of 0.2 percent in March. This was the biggest fall since October 2023. GDP was expected to drop marginally by 0.1 percent.

The production-side of GDP showed that services output contracted 0.4 percent, reversing March's 0.4 percent rise.

Industrial production decreased 0.6 percent, which was slightly slower than a 0.7 percent drop in March. By contrast, construction output grew at a faster pace of 0.9 percent after rising 0.5 percent a month ago.

In the three months to April, the economy expanded 0.7 percent from the previous three months largely driven by growth in the service sector.

Compared with April 2024, GDP advanced 0.9 percent, the ONS said.

Another report from the ONS showed that the visible trade deficit widened to GBP 23.2 billion in April from GBP 19.9 billion in the previous month. The deficit was forecast to rise to GBP 20.8 billion.

The weaker-than-expected UK GDP statistics, together with the disappointing UK employment data reported earlier this week, may raise market expectations that the Bank of England (BoE) will cut interest rates by more than investors had previously anticipated.

The European shares traded lower, as investors react to Sino-U.S. trade deal uncertainty and escalating U.S.-Iran tensions. There is considerable ambiguity over the U.S.-China trade deal in the wake of conflicting claims about tariff rates and lack of confirmation from Beijing.

U.S. President Donald Trump did not fully spell out what concessions the U.S. made. Also, the framework must be approved by the heads of state of the two countries.

Adding to investor anxiety, Trump said he would notify trading partners within the next one to two weeks about the new unilateral tariff rates, with the choice to accept or reject them.

Elsewhere, in a sign of growing regional tensions, Iran said it will strike U.S. bases in the Middle East if nuclear talks fail and conflict arises with Washington.

As hopes of a diplomatic resolution erode, the White House has also warned of military measures and decided to move embassy staff and dependents partly due to Israeli preparations for attack on Iran.

In the European trading today, the pound fell to more than a 1-month low of 0.8507 against the euro, a 9-day low of 1.1056 against the Swiss franc and a 2-day low of 194.81 against the yen, from early highs of 0.8477, 1.1111 and 195.78, respectively. If the pound extends its downtrend, it is likely to find support around 0.87 against the euro, 1.09 against the franc and 192.00 against the yen.

Against the U.S. dollar, the pound edged down to 1.3257 from an early 1-week high of 1.3594. The pound may test support near the 1.33 region.

Looking ahead, U.K. NIESR Monthly GDP tracker data for May is slated for release at 7:00 am ET.

In the New York session, U.S. PPI for May, U.S. weekly jobless claims data and U.S. WASDE report are set to be published.