Forex News: Pound Falls As U.K. Economy Stagnates

Pound Falls As U.K. Economy Stagnates

(RTTNews) - The British pound weakened against other major currencies in the European session on Friday, after U.K. economy logged no growth in January, as growth in construction was offset by contraction in industry and flat services activity.

Data from the Office for National Statistics showed that the U.K. gross domestic product remained flat after rising 0.1 percent in December and 0.2 percent in November. Economists had forecast a monthly growth of 0.2 percent.

The dominant service sector registered no growth, and industrial production edged down 0.1 percent. Meanwhile, the construction sector expanded 0.2 percent.

On a yearly basis, the economy expanded 0.8 percent in January, slightly weaker than forecast of 0.9 percent.

In the three months to January, real GDP grew 0.2 percent, following a growth of 0.1 percent in the three months to December.

The UK recorded a trade surplus of £3.92 billion in January 2026, after posting a £4.34 billion deficit in the previous month. This marks the first surplus since September 2024.

Exports rose 7.2% month-on-month to a record £82.51 billion, while imports fell 3.3% to a one-year low of £78.59 billion.

The mood in the market, however, remains cautious amid concerns about potential economic impact of the ongoing conflict in the Middle East and increasing prospects of a rate cut by the Bank of England this year.

The continued rise in crude prices amid an escalating conflict in the Middle East fueled inflation worries and reduced expectations of near-term Federal Reserve rate cuts.

In the European trading today, the pound fell to nearly a 3-1/2-month low of 1.3245 against the U.S. dollar, from an early high of 1.3370. The pound may test support near the 1.31 region.

Against the euro and the yen, the pound dropped to a 2-day low of 0.8651 and a 4-day low of 211.17 from early highs of 0.8620 and 212.88, respectively. If the pound extends its downtrend, it is likely to find support around 0.87 against the euro and 208.00 against the yen.

Moving away from an early near 1-month high of 1.0501 against the Swiss franc, the pound slipped to a 4-day low of 1.0439. On the downside, 1.03 is seen as the next support level for the pound.

Looking ahead, Canada jobs data for February, manufacturing sales data for January, U.S. core PCE price index, durable goods order, personal income and spending data, all for January, U.S. University of Michigan's consumer sentiment for March and U.S. Baker Hughes oil rig count data are slated for release in the New York session.

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