UK growth data beats expectations

Daily Currency Update

The UK economic growth slowed between April and June, according to official figures, but was better than expected following the GDP release this morning.

The euro started yesterday’s session strongly, climbing against the dollar to near three-week highs of 1.173 before easing back gradually amid caution ahead of today’s EU GDP release, forecast at a flat 0.1% — unchanged from the previous quarter. Sentiment was supported, however, by US Treasury Secretary Bessent’s remarks that short-term Federal Reserve interest rates should be 1.5–1.75 percentage points lower than their current level. Against the pound, the euro fared worse. Muted German inflation data set a subdued tone, and traders shifted focus to the UK’s GBP figures. Following their release, the euro extended its decline to 0.86 — its lowest level versus the pound in six weeks.

The USD had a very poor day, exacerbated by traders speculating that the Federal Reserve might be pressured following remarks by US Treasury Secretary Scott Bessent. His comments earlier in the week already caused a sell off and it looks like he is doubling down as he added in an interview with Bloomberg, that rates should be “150, 175 basis points lower.” As traders look towards today's USD PPI data, we could be in for more Dollar weakness if it comes out lower than forecast like Tuesday's CPI data.