UK GDP exceeds expectations

Yesterday's currency recap

USD slid for the 2nd consecutive day, driven by remarks from US Treasury Secretary Scott Bessent. He argued that the Fed Funds rate should be at least 150bp lower and suggested officials might already have cut had they seen the revised labour market data earlier. Bessent also floated the possibility of a 50bp September cut and flagged that the Bank of Japan is “behind the curve” and likely to hike to tame inflation. The immediate reaction was more pronounced in US treasuries, with yields dropping 5 to 6bp lower, adding to USD losses and JPY gained.

Today's GBP rates

Key data points

What we think

In the UK, GDP data delivered an upside surprise, rising more than was forecast in June, on robust exports and stronger factory output. The print reinforces the case for the BoE to stay patient, with two-year gilt yields pushing towards 3.90%, as November rate cut expectations ease.

Focus now turns to the US PPI ex-food and energy release at 1.30pm. While services prices are expected to remain contained, risks are skewed towards higher goods prices, as tariffs start to filter through.

JPY remains bid after the Bessent-BoJ comments, and GBP is continuing to make further gains following the GDP numbers.

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