The Pound Sterling (GBP) strengthened notably against its major peers following the release of robust UK economic data for February. The Office for National Statistics (ONS) reported that UK Gross Domestic Product (GDP) grew by 0.5% month-over-month, significantly surpassing both the market consensus of 0.1% and the previous month's figure of 0% [1][2][3]. January’s GDP was also revised higher from 0% to 0.1% [3].
Industrial Production in the UK rose by 0.5% in February, outperforming expectations of a 0.2% increase and reversing a 0.1% decline in January [1][2][3]. However, Manufacturing Production contracted by 0.1% month-over-month, missing forecasts of a 0.3% rise, after a 0.1% increase in January [1][3]. The Index of Services for February increased by 0.5% on a three-month-on-three-month basis, up from 0.2% in January [1].
In the currency markets, GBP/JPY hovered around 215.60, close to its all-time high of 215.91 reached on April 15, after an eight-day winning streak [1]. The EUR/GBP cross softened below 0.8700, trading around 0.8695, as the Pound attracted buyers on the back of the strong data [2]. GBP/USD traded 0.14% higher near 1.3580 during the European session [3].
Market sentiment was further influenced by speculation that Japanese authorities may intervene to support the Yen, as well as by optimism over a potential US-Iran ceasefire, which weighed on the US Dollar Index (DXY), keeping it flat around 98.00 after hitting a six-week low of 97.83 [1][3]. Japanese Finance Minister Satsuki Katayama indicated readiness to act decisively on currency matters after discussions with US Treasury Secretary Scott Bessent [1]. The International Monetary Fund (IMF) commented that the Bank of Japan could look through inflation stemming from the Iran conflict, as its impact on underlying price pressures is expected to be limited [1].
On the European front, the European Central Bank (ECB) is expected to keep interest rates unchanged at its April meeting, though markets anticipate two quarter-point hikes later in the year, with a move by June nearly fully priced in [2].
CONCLUSION
Stronger-than-expected UK GDP and Industrial Production data have driven the Pound Sterling higher against major currencies, signaling renewed confidence in the UK economy. The market reaction has been pronounced, with GBP pairs rallying and the EUR/GBP and USD/GBP crosses reflecting the upbeat sentiment. Forward-looking, attention will remain on central bank policy decisions and geopolitical developments for further market direction.