The pound was in the red around midday on Friday after economists downgraded their forecasts for UK growth following the latest official data.
The US dollar index (DX-Y.NYB), which measures the currency against a basket of six major peers, edged up to 100.03, over a three-month high, as investors flock to safe havens.
The pound was down 0.5% against the dollar (GBPUSD=X), at $1.3281 and similar versus the euro (GBPEUR=X), down 0.3% to trade at €1.1558.
“For the moment now, the market has got a new focus. It’s not diversification, it’s inflation, and it’s lower growth,” Gavin Friend, senior markets strategist at National Australia Bank in London, told Reuters. “It’s the mix, the toxic mix, of higher inflation and lower growth that will come the longer this whole crisis stays with us.”
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Thomas Pugh, chief economist at RSM UK, said: “The January GDP report was not what the doctor ordered. We, alongside others, expected the UK economy to bounce back strongly after a tepid end to 2025. Instead, the economy stalled – showing no growth.
“Our expectations for a strong start to the year have diminished. With the Iran conflict bubbling in the background, further headwinds will drag UK growth lower. Rising energy prices will squeeze real disposable incomes, constraining spending and investment. Hiring plans will likely be shelved too, and higher uncertainty will dampen animal spirits.”
In equities, the FTSE 100 (^FTSE) managed to make a shy comeback after starting Friday in the red, climbing 0.2% to trade at 10,323 points at the time of writing. For more details on market movements, check our live coverage here.
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