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UK GDP data came in softer than expected, showing the economy ended the year with thin growth and fading momentum—a setup that keeps the expansion narrative cautious.

• GDP (YoY, Q4): 1.0% vs 1.2% expected (prior 1.2%)
• GDP (QoQ, Q4): 0.1% vs 0.2% expected (prior 0.1%)
• GDP (MoM, Dec): 0.1% vs 0.1% expected (prior 0.2%)
• Monthly GDP 3M/3M (Dec): 0.1% vs 0.2% expected (prior -0.1%)
• GDP (YoY, Dec): 0.7% vs 1.1% expected (prior 1.2%)

GBP angle:

A broad miss across the quarterly and annual prints is typically GBP-negative at the margin, as it can reinforce a more dovish BoE tilt and keep UK assets sensitive to downside growth surprises—unless inflation data forces the Bank to stay restrictive.

UK government borrowing costs moved higher at the front-to-belly of the curve, with the latest 5-year gilt auction printing at a notably higher yield.

• 5-Year Treasury Gilt Auction: 4.001% vs 3.821% prior

The rise suggests investors demanded more yield to absorb supply, pointing to tighter financial conditions and renewed sensitivity to rates and fiscal/issuance dynamics.

GBP angle:

Higher gilt yields can be supportive for GBP via the rates channel (wider yield advantage), but if the move reflects risk premium or fiscal anxiety rather than tighter BoE expectations, it can become a double-edged signal—supportive for carry, but potentially negative for risk sentiment around UK assets.

UK retail spending momentum looked stronger in January, with the BRC Retail Sales Monitor accelerating sharply and landing well above expectations—an upside signal for the consumer backdrop at the start of the year.

• BRC Retail Sales Monitor (YoY, Jan): +2.3% vs +1.3% expected, +1.0% prior

GBP angle:

A stronger retail read can be supportive for GBP via the growth channel and by reinforcing the idea that demand is holding up. The key caveat is whether the gain reflects real volumes or price effects—but as a headline, this is a clear positive surprise.

UK house prices surprised to the upside in January. The Halifax House Price Index rose 0.7% MoM (vs 0.1% expected, **-0.5% prior), marking a sharp rebound. On the year, prices were up 1.0% YoY (vs **0.4% prior), suggesting the housing market is stabilizing and regaining momentum. For GBP, stronger housing data can support the domestic-growth narrative, though the market will weigh it against the BoE’s increasingly dovish vote split and broader inflation dynamics.

UK mortgage rates edged lower in January, with the average rate at 6.62%, down from 6.77% previously. The decline suggests a modest easing in household borrowing costs, which can help stabilize housing demand at the margin—though rates remain high enough to keep affordability tight. For GBP, it’s a small positive for domestic financial conditions rather than a major market mover.

UK new passenger car registrations totaled 144,127 in January, down from 146,249 previously. On a year-on-year basis, registrations were still up +3.4% YoY, but that’s slower than the prior +3.9% pace—suggesting auto demand is growing yet losing a bit of momentum at the start of the year.

The UK’s S&P Global Construction PMI improved sharply to 46.4 in January (vs 42.2 expected, 40.1 prior), signalling a faster-than-anticipated rebound in activity. However, the index remains below 50, meaning construction is still in contraction—just at a much slower pace than late 2025. For GBP, the surprise upside is supportive on growth optics, but the sub-50 level keeps the sector’s broader drag in focus.

The Bank of England kept the Bank Rate at 3.75% in February (in line with expectations and unchanged from prior). But the vote split turned more dovish: 4 MPC members voted to cut (vs 2 expected, 5 prior), while 5 voted to hold (vs 7 expected, 4 prior), and 0 voted to hike. The takeaway is a “steady rate, easier bias”—the hold masks a growing bloc ready to ease, which can cap GBP upside and keep markets leaning toward a cut narrative if upcoming inflation and wages data soften.

The UK’s January PMI data remained firmly in expansion but came in a touch softer than expected. The S&P Global Services PMI rose to 54.0 (vs 54.3 expected, 51.4 prior), while the Composite PMI printed 53.7 (vs 53.9 expected, 51.4 prior). Both are well above 50, signalling solid growth momentum—yet the small forecast misses suggest activity is rebounding strongly from December, but not quite as hot as markets had priced. For GBP, it’s broadly supportive on growth optics, though the “slightly cooler than expected” nuance can temper aggressive rate-pricing at the margin.

The UK’s 10-year Treasury gilt auction cleared at 4.585%, up from 4.456% previously (about +13 bps). The higher stop-out yield points to a rise in long-end funding costs and suggests investors demanded more yield to absorb duration—an important signal for UK rates pricing and, at the margin, GBP sentiment.

The UK’s S&P Global Manufacturing PMI rose to 51.8 in January (vs 51.6 expected, 50.6 prior), moving further into expansion territory and marking a stronger start to the year for factory activity. The upside surprise and improvement from December suggest momentum is firming—potentially supportive for GBP sentiment if it’s driven by new orders and output rather than just inventory dynamics.

The UK’s Nationwide House Price Index showed a steady January pickup: prices rose 0.3% MoM (in line with 0.3% expected) after -0.4% previously, signaling a near-term rebound in housing momentum. On a yearly basis, prices increased 1.0% YoY (vs 0.7% expected, 0.6% prior), a firmer-than-forecast acceleration that suggests housing conditions are improving at the margin—potentially supportive for GBP sentiment if it feeds into consumer confidence and credit activity, though the broader rate and affordability backdrop still dominates.