[MARKET ANALYSIS] UK GDP surprises to the upside, GBP unreactive to data as MPC likely to focus more on energy-related inflation

UK GDP came in far stronger than expected in February. On a monthly basis, GDP rose 0.5%, while yearly saw an increase of 0.1%. This set of metrics did not encapsulate the US-Iran war and as such, MPC members will likely refer to the second round effects of the energy shock before opting to adjust rates. ING writes "UK output surged in February, but it's in line with a trend dating back to 2022, where growth is stronger in the first quarter than across the rest of the year. We're taking this latest data with a pinch of salt" Recent PMIs signalled “solid expansion of UK service activity”, which translated to the release with accompanying commentary noting "Growth in services and production was partially offset by another fall in construction." Elsewhere, Pantheon Macro said "Our measure of underlying GDP points to about half of February’s GDP gain being erratic and half genuine." Pantheon also opines, "The solid pre-war growth environment suggests that the MPC will struggle to cut rates much this year even if energy prices fall back sharply in the coming months."
EURGBP was ultimately unreactive to the metrics; the cross continues to attempt a rebound above the 0.87 mark where the cross's 100 DMA sits. Cable continues to trade towards recent highs and is essentially at pre-war levels. The pair attempted to breach 1.36, a rally which faltered at 1.3594.