GBP/JPY accelerated its downward move, trading near 194.70, close to the bottom of last week’s range. The pair was pressured by disappointing UK economic data, including weak monthly GDP and manufacturing output figures.
UK Economy Shrinks Sharply in April
The UK economy contracted by 0.3% in April, the worst monthly performance since October 2023. This decline was deeper than the 0.1% contraction forecast by experts and reversed the positive growth seen in March (0.2%) and February (0.5%). The downturn was driven by tax hikes and the impact of US tariff increases under the Trump administration.
Manufacturing and Industrial Output Also Disappoint
UK manufacturing output fell by 0.9%, exceeding the expected 0.8% drop. Industrial output also declined by 0.6%, worse than the predicted 0.5% fall. The trade deficit widened sharply to £23.2 billion in April, up from under £20 billion in March.
US-UK Trade Deal Fails to Protect Exports
The recent US-UK trade deal did little to stop a record monthly drop in UK exports to the US. Higher US tariffs forced British companies to cut jobs and delay investment plans, hitting the economy further.
Rate Cut Expectations Rise as Economy Weakens
These weak data, along with a rise in the UK unemployment rate reported earlier this week, have increased expectations that the Bank of England (BoE) will ease monetary policy further. Futures markets currently price in two more rate cuts by the end of the year, reflecting hopes for additional support to the struggling economy.
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