GBP Falls After Q2 GDP Beat Despite Narrowing Momentum

The pound sterling fell to $1.3479 on Thursday after the UK's second-quarter GDP release, despite beating expectations with a 0.4% growth rate. The pair had rallied above its 50-day moving average and tested the top of the recent range, but traders' expectations were already priced in.

The Office for National Statistics reported that the UK economy expanded 0.4% during the second quarter, matching consensus and representing a slowdown from 0.6% growth in the opening three months of 2026. The monthly detail was the genuine surprise, with June GDP increasing 0.3%, while services provided the main support during June with a 0.4% increase.

The market is being asked to extrapolate a 0.4% quarter into a policy path, but growth forecasts for the full year sit near 1.0% for 2026 before recovering to 1.3% in 2027 as the energy shock dissipates. Business sentiment supports the cautious read, with the Federation of Small Businesses index finding just 18% of small firms expect to grow over the next twelve months while 32% expect to shrink or close.