[MARKET ANALYSIS] GBP unreactive to soft in-line GDP, price action dictated by geopolitics

UK GDP contracted in April, in line with expectations. The annual rate remained at 1.2% Y/Y. The three-month average rate was 0.7% in the month, above expectations of 0.0% and a previous 0.6%. The data was driven lower by weak R&D and entertainment figures, with the latter affected by the cancellation of sporting events in the Middle East, pressure that may ease given recent Gulf developments. Limiting the downside was robust services growth, up 0.8% on a three-month basis, with particular strength in tech services. Following the data, Pantheon reiterated its expectation for GDP growth to slow to 0.2% Q/Q in Q2 and 0.1% in Q3. Lloyds and Oxford Economics expect softer growth ahead. For the BoE, the data aligns with the longstanding narrative that UK growth is soft and serves as an argument against near-term tightening, particularly as the UK already finds itself well into restrictive territory.
GBP unreactive to the in-line print, with price action across the FX space dictated by geopolitics. GBP/USD +0.1% after finding buyers below 1.34. EUR/GBP U/C with both currencies benefiting from Oil weakness.