UK GDP surprises, but forward risks limit the celebration

Lale Akoner, global market analyst at eToro says: “The UK economy beat expectations in Q1 with 0.7% growth, offering a rare dose of optimism. Services were strong, production bounced back, but any celebration should be brief. Data ends just before Donald Trump kicked off a fresh round of trade tensions in April, which means the real test is coming in Q2.

“Yes, the UK-US trade deal removed immediate tariff threats, but it came with geopolitical strings that may complicate relations with China, a key trading partner. Meanwhile, the Bank of England, fresh off a rate cut to 4.25%, remains boxed in. Inflation is still sticky, wage growth is firm, and policymakers are signalling caution on further easing.

“So, while the Q1 data gives the BoE some breathing room, it doesn’t change the fact that the second quarter looks more fragile. Growth may have surprised on the upside, but risks, both domestic and global, are rising. The BoE’s margin for error remains thin.”