Euro Holds Ground as UK GDP Slows Amid Energy Crisis Fears

The Euro holds its ground against the British Pound as UK GDP slows in Q2. The EUR/GBP cross is trading near 0.8540 during early European trading hours on Thursday. Despite the mixed growth report, the British Pound remains weak against the Euro.

Data released by the Office for National Statistics showed that the UK economy grew by 0.4% QoQ in Q2 2026, compared to a 0.6% growth in Q1. On an annual basis, the UK GDP expanded 1.2% year-over-year (YoY) in Q2 2026 versus a 0.9% growth prior.

Economists at Deutsche Bank caution that the recent strength in the UK economy is unlikely to be sustained through the remainder of the year. They note that the 'energy crisis will likely catch up with households and business in Q3-26, as dual fuel bills rise,' pointing to higher utility costs as a key headwind to activity after a robust first half.

The European Central Bank (ECB) is expected to raise interest rates by 25 basis points (bps) at its September monetary policy meeting. ECB president Christine Lagarde warned last month that renewed Middle East hostilities and the resultant rebound in oil prices pose upside risk to the Eurozone inflation outlook.