The Pound Sterling was mixed on Tuesday after revised UK GDP data confirmed the economy expanded strongly at the start of the year, while fresh figures suggested households are increasingly willing to dip into savings to maintain spending.
The Pound to Dollar exchange rate (GBP/USD) traded at 1.3235, down 0.14% on the day, while the Pound to Euro exchange rate (GBP/EUR) edged 0.05% higher to 1.1612.
UK GDP was confirmed at 0.6% quarter-on-quarter in the first three months of 2026, matching the preliminary estimate and following growth of 0.2% in the previous quarter.
The figures left Pound Sterling largely unchanged as there were no significant revisions to the headline economic growth data.
The detailed national accounts painted a more mixed picture of the economy.
UK Services remained the principal driver of growth, expanding 0.8% during the quarter, while production rose 0.2% and construction increased 0.4%.
However, real household disposable income per person fell 0.8% over the quarter, while the household saving ratio declined to 8.9% from 9.6%, suggesting consumers increasingly relied on savings to maintain spending amid higher taxes and rising living costs.
According to Exchange Rates UK Research, Pound Sterling experienced only limited volatility following the 07:00 BST release, reflecting the absence of any meaningful revisions to GDP.
Market Reaction
- Q1 GDP was confirmed at 0.6%, matching expectations.
- Services remained the largest contributor to economic growth.
- Pound Sterling reaction was relatively muted following the release.
- Falling household incomes and a lower saving ratio offset the positive GDP headline.
- Markets remained focused on the outlook for Bank of England interest rates.
Pantheon Macroeconomics said the details reinforce the view that the economy remains more resilient than business surveys have recently suggested.
“Underlying growth is solid.”
The consultancy highlighted that household consumption rose 0.6%, business investment increased 0.9%, and government spending was revised sharply higher.
Pantheon also pointed to a fall in the household saving rate from 9.6% to 8.9%, suggesting consumers are becoming more willing to support spending despite higher living costs.
“The saving rate still remains well above its 2015-to-2019 average of 6.5%.”
That leaves scope for households to continue reducing savings and cushioning the impact of slower real income growth during the second half of the year.
“We continue to think that consumers’ spending can help GDP growth hold up over H2.”
Pantheon cautioned that higher inflation is still likely to restrain real household incomes and expects the current account deficit to remain weak through 2026 as higher energy costs continue to weigh on imports.
