UK GDP Growth Expected to Slow in Q2, Boosting Sterling

The UK's second-quarter GDP is expected to show moderate growth, despite geopolitical tensions. According to market analysts, the economy will expand by 0.4% in the three months to June, after a modest 0.6% advance in the first quarter of this year. This translates to an annual progress rate of 1.1%, up from 0.9% posted in March.

The GDP figures are expected to have a significant impact on the British Pound (GBP), as they will be released alongside other key indicators, including the Goods Trade Balance and Industrial and Manufacturing Production. Analysts anticipate that if the outcome meets expectations, it may mitigate the negative effects of weaker consumer spending and tighter credit conditions.

As inflation risks remain skewed to the upside, with pressure coming from higher energy prices, policymakers at the Bank of England are divided on whether to raise interest rates further. Valeria Bednarik, Chief Analyst at FXStreet, notes that a better-than-anticipated GDP outcome is likely to push the GBP/USD pair closer to 1.3600, although sustained gains around this level would depend on market sentiment and USD strength or weakness.