The British Pound was steady ahead of the new week, with GBP/EUR at 1.1530 and GBP/USD at 1.3342, as investors assess a mixed UK growth outlook and rising global risks.
Pantheon Macroeconomics says the UK economy is holding up better than recent headline data suggests, with underlying momentum still positive despite volatility in monthly figures.
“The economy continues to grind higher once volatility is stripped out,” the consultancy said.
Recent GDP weakness has been driven partly by erratic sectors and temporary factors, which Pantheon expects to unwind. Manufacturing swings and services volatility have masked a more gradual recovery trend.
However, the firm has trimmed its near-term outlook, warning that growth is likely to remain modest.
“We have shaved our Q1 growth forecast,” Pantheon said, pointing to softer data and emerging headwinds.
A key risk comes from the escalation in the Middle East, which is expected to weigh on confidence and activity.
“Rising energy prices and geopolitical uncertainty will hit sentiment,” Pantheon said, adding that the impact on growth will depend on how long tensions persist.
Domestic demand also looks fragile. Retail activity has been uneven, with weather-related disruption and cautious consumers limiting spending momentum.
Even so, Pantheon notes that households are in a position to smooth short-term shocks, which should help prevent a sharper downturn.
“Households may be prepared to smooth through a temporary hit to real incomes,” the note said.
For the Bank of England, the outlook remains finely balanced. Modest growth and rising external risks suggest policymakers are likely to remain cautious, particularly as energy-driven inflation pressures build.
For sterling, that leaves the currency sensitive to both incoming UK data and global developments, especially energy markets and risk sentiment.
In the near term, Pantheon’s view implies limited directional conviction for the pound, with steady but unspectacular growth offset by a clear tilt toward downside risks.
