UK economic data released on Thursday showed stronger-than-expected performance in both GDP and manufacturing sectors. Preliminary figures from the Office for National Statistics indicated that UK Gross Domestic Product (GDP) grew by 0.6% in the first quarter of 2026, matching market expectations and accelerating from 0.2% growth in the previous quarter [1][2]. The monthly GDP figure for March surprised to the upside, posting a 0.3% increase compared to expectations of a 0.2% contraction, alleviating concerns about a sharp economic downturn related to the war in Iran [1][2].
Manufacturing Production rebounded sharply in March, rising by 1.2% after a downwardly revised 0.2% contraction in February, and surpassing expectations of another 0.2% contraction [1][2]. The UK services sector also showed strength, with the Index of Services accelerating to 0.8% growth in March from 0.5% in February, beating the 0.6% market consensus [1][2].
Despite the positive economic data, the British Pound remained flat against both the Euro and the US Dollar, trading around 0.8660 against the Euro and 1.3520 against the US Dollar at the time of reporting [1][2]. Political uncertainty in the UK, particularly following the Labour Party's defeat in local elections and internal party turmoil, has weighed on the Pound, which has lost nearly 1% so far this week [2]. Prime Minister Keir Starmer is facing pressure to resign, warning that a leadership contest would create 'chaos' [2].
In the Eurozone, Spain's Harmonized Index of Consumer Prices rose to 3.5% year-on-year in April from 3.4% in March, highlighting ongoing inflationary pressures [1]. Market participants are also awaiting a speech from European Central Bank President Christine Lagarde in Aachen, Germany, which may provide clues about the timing of the next ECB interest rate hike, with markets anticipating a move in June or July at the latest [1].
On the international front, US President Donald Trump met with Chinese President Xi Jinping in Beijing, describing the meeting as 'great.' The summit is focused on improving trade relations and addressing issues such as the Middle East conflict and US support for Taiwan [2].
CONCLUSION
UK GDP and manufacturing data have exceeded expectations, providing some support for the Pound. However, ongoing political uncertainty and external geopolitical factors are limiting further gains. Investors are closely watching upcoming central bank communications and international developments for further market direction.