The British Pound remained largely flat against the US Dollar on Thursday, with the GBP/USD pair trading near 1.3520 at the time of writing.
The currency pair continued to consolidate losses after retreating from weekly highs around 1.3650 reached earlier this week.
The Pound, however, found some support after the release of stronger-than-expected UK economic data, including Gross Domestic Product (GDP), manufacturing output, and services activity figures.
UK economy posts stronger growth in first quarter
Preliminary data showed that the UK economy expanded by 0.6% in the first quarter of the year, matching market expectations and improving from the 0.1% growth recorded in the previous quarter.
The bigger surprise came from March’s monthly GDP reading.
The economy grew by 0.3% during the month, significantly outperforming expectations for a 0.2% contraction.
The data eased concerns about a potential sharp economic slowdown linked to the ongoing war in Iran.
The stronger growth figures provided some relief for investors who had been concerned about the impact of geopolitical tensions on economic activity.
Manufacturing and services activity exceed expectations
Additional UK economic indicators also pointed to stronger momentum at the end of the quarter.
Manufacturing Production rebounded sharply in March, recording a 1.2% increase after a downwardly revised 0.2% contraction in February.
The figure also exceeded market forecasts, which had anticipated another 0.2% decline.
Meanwhile, the UK’s services sector continued to show resilience.
The Index of Services rose by 0.8% in March, accelerating from February’s 0.5% growth and beating expectations for a 0.6% increase.
The stronger manufacturing and services data helped offset some of the pressure on the Pound, which has faced headwinds throughout the week.
Trump-Xi meeting keeps investors cautious
Investor attention also remained focused on developments in China, where US President Donald Trump met Chinese President Xi Jinping during a two-day summit aimed at improving trade relations between the two countries.
Shortly after leaving the Temple of Heaven following his first meeting with Xi, Trump described the talks as “great”.
The summit is expected to address several sensitive geopolitical issues, including the conflict in the Middle East and US support for Taiwan’s independence.
Investors remained cautious ahead of further developments from the talks, with markets closely monitoring any signs of progress in US-China relations.
UK political uncertainty weighs on sterling
Despite the positive economic data, political uncertainty in the UK continued to weigh on the Pound.
Sterling has lost nearly 1% against the US Dollar so far this week as concerns surrounding the political outlook intensified.
The Labour Party’s defeat in last week’s local elections has reportedly triggered internal tensions, with some party officials emerging as potential candidates to replace Prime Minister Keir Starmer.
Starmer has resisted calls to resign and warned that a leadership contest within the party would create “chaos”.
However, political uncertainty has continued to pressure investor sentiment toward the British currency.
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