UK February GDP Beats Expectations, but Energy Shock May Weigh on Future Growth

Summary:

Strong headline data from the UK has somewhat eased concerns over economic growth, but it has not fully offset broader uncertainties related to inflationary pressures and external risks.

SELL GBPUSD

EXP

TRADING

1.35513

Entry Price

1.32560

1.37300

1.35313 -0.00268 -0.20%

0.0

Pips

Flat

1.32560

Exit Price

1.35513

Entry Price

1.37300

Fundamentals

GBP/USD reversed its gains from the earlier Asian session and pulled back toward the 1.3500 level during European trading hours. While robust UK data has helped alleviate some growth concerns, it has not fully countered the narrative that the strong economic momentum may already be fading, which in turn has weighed on the pound.

Data released on Thursday showed that the UK economy grew well above expectations in February. GDP expanded by 0.5% for the month, significantly higher than the forecast of 0.2%. The expansion was broad-based, with both services and manufacturing rising by 0.5%, while construction posted a stronger gain of 1.0%, indicating a solid rebound in output. Given the latest data, overall spending appears stronger than previously anticipated. Prior to the escalation of the US-Iran conflict, business investment may also have been more resilient than expected.

First-quarter growth could come in at more than double market expectations, which may lift full-year projections. However, February’s GDP data likely represents a “calm before the storm” ahead of escalating geopolitical tensions in the Middle East. Households have already begun to feel the impact of rising energy costs, weighing on consumption. Businesses are also expected to scale back investment and hiring plans. As a result, growth in Q2 and beyond is likely to soften.

UK February GDP Beats Expectations, but Energy Shock May Weigh on Future Growth_1

Technical Analysis

As long as the short-term support at 1.3485 remains intact, GBP/USD retains the potential for further upside. A decisive break above 1.3590 would confirm continuation of the rally from 1.3158 and open the door for a retest of the 1.3868 high.

On the downside, a break below 1.3485 would turn the intraday bias neutral. A further decline below 1.3380 could accelerate losses toward the recent rally origin at 1.3280.

Trading Strategy

Direction: Sell

Entry: 1.3550

Target: 1.3256

Stop Loss: 1.3730

Valid Until: 2026-05-15 23:55

Support Levels: 1.3484, 1.3380, 1.3343

Resistance Levels: 1.3594, 1.3662, 1.3725

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