British Pound Sold Off as UK Economy Barely Grows
The British pound was sold off against its major trading pairs in the forex market as UK economic growth slows, latest data from the statistics office showed.
Sterling fell to $1.31, its lowest rate in seven years, after weaker-than-expected economic data raised expectations of a Bank of England rate cut next month.
With the recent economic data, the market now expects the Bank of England to cut rate in December to boost UK employment and drive productivity.
The US dollar is mostly consolidating in narrow ranges against the major currencies. The notable exception is the Japanese yen, which has slumped to a new nine-month low as the greenback approached 155 on Thursday.
GBP is expected to remain tight this week due to negative investors’ reactions.
UK real gross domestic product (GDP) is estimated to have increased by 0.1% in Quarter 3 (July to Sept), compared with growth of 0.3% in Quarter 2 (Apr to June) 2025, according to Office of National Statistics.
The UK economy delivered 0.1% growth in Q3 after a 0.3% expansion in Q2 and 0.7% in Q1. The economy contracted 0.1% in September, and August’s 0.1% growth was revised to flat.
Data released earlier showed the jobless rate hit a four-year high, and pay growth slowed to its weakest since early 2022.
The weak figures follow this week’s rise in unemployment to 5%, the highest in four years, and come just weeks before Chancellor Rachel Reeves unveils her crucial Autumn Budget on 26 November.
The combination of soft growth, rising joblessness, and likely fiscal tightening points to further downside for the pound, even as much of the bad news appears already priced in.
Sterling was sold to $1.3085 before the nearly £1.9 billion options expired at $1.3100 yesterday. However, GBPUSD recovered to almost $1.3140 by midday despite disappointing GDP data.
In September, industrial output fell 2% and services output crept up (0.2%), construction output rose 0.2% (0.3% in August), and the trade deficit narrowed slightly.
UK Economy to Weaken into 2026 -ING
Looking ahead, analysts are warning that growth could weaken further into early 2026. ING forecasts that GDP could fall by up to 1% next year, effectively flattening UK growth.
“UK Chancellor Rachel Reeves will present the annual budget on 26 November. Combined with structural adjustments next year and the amount of fiscal headroom she wants to create, the fiscal tightening could be worth 0.5–1.0% of GDP,” ING wrote.
Such fiscal restraint could force the BoE into a more aggressive easing cycle, with as many as three cuts expected in the first half of next year, potentially taking the Bank Rate down to around 3.25%, considered the “neutral” level.
That outlook leaves the pound sterling looking vulnerable to further declines. If the market begins to price in additional cuts, EUR/GBP could climb toward 0.90, especially once it breaks through the current sticky 0.88 level. # British Pound Sold Off as UK Economy Barely Grows Bank of England Keeps UK Interest Rate at 4%
