Support
Pound extends winning streak as UK growth beats forecasts
Sterling outperforms G-10 peers for a sixth day against the euro and hits its strongest level in a month versus the dollar after UK GDP surprises to the upside.
UK GDP grew 0.3% q/q in Q2 2025, above the 0.1% forecast, with services and construction offsetting weakness in production.
Sterling rose to $1.3592, its highest since July 10, and extended gains for a sixth day against the euro — the longest streak in three months.
Markets see stronger support for sterling from the Bank of England’s hawkish stance and reduced rate cut expectations versus the US Federal Reserve.
One-week currency options turn bullish on sterling, with $1.35 now viewed as a potential support zone.
UK GDP surprise underpins sterling strength
The pound continued its upward momentum on Thursday, buoyed by stronger-than-expected growth figures that reinforced market confidence in the UK economy. Sterling climbed 0.1% to $1.3592, its highest since July 10, extending its outperformance against all G-10 peers over the past week. Against the euro, the currency is on track for a sixth consecutive daily gain — the longest such streak in three months.
Preliminary data showed the UK economy expanded by 0.3% quarter-on-quarter in Q2 2025, beating consensus estimates of 0.1% despite slowing from Q1’s robust 0.7% rise. The better-than-expected performance came despite headwinds from the April stamp duty changes and new US tariffs, which had pulled forward some economic activity into earlier months.
Services and construction lead the expansion
Growth in Q2 was driven by a 0.4% rise in the services sector, led by computer programming and consultancy, which surged 4.1%. Construction output climbed 1.2%, while production fell 0.3% as utilities dropped 6.8% and mining slipped 0.3%. Manufacturing offered a partial offset with a 0.3% gain.
From the expenditure side, government consumption rose 1.2%, particularly in health — driven by vaccination programs — and in public administration and defence. Gross capital formation increased due to higher valuables, inventories, and alignment adjustments, but business investment fell sharply by 4%. Household spending edged up only 0.1%, while exports grew 1.6%, slightly outpacing the 1.4% rise in imports.
BOE policy divergence fuels currency momentum
Sterling’s rally has been supported by shifting central bank expectations. Markets have scaled back Bank of England rate cut pricing to just 15 bps by year-end, compared with around 62 bps priced for the US Federal Reserve over the same period. The divergence follows last week’s BOE decision, where the vote to cut rates was far closer than expected, signaling caution on easing too quickly.
The contrast with the Fed’s softer tone has enhanced sterling’s relative appeal. Options markets show one-week sentiment on GBP/USD turning bullish, with one-month positioning moving to neutral for the first time since early July. It could be noted that $1.35 is emerging as a potential support level in the pair, given the BOE’s hawkish bias and underlying economic resilience.
