UK GDP growth disappoints as quarterly figure shows little progress GBP UK GDP for the first quarter came in below expectations, with the quarterly figure rising 0.8% against the 1.0% expected. Given last week’s monetary policy report from the Bank of England, this further reiterates the view of policymakers that growth will slow down throughout the year. Economic growth will take a bigger hit in Q2, highlighting the stagflation risks that the UK economy is facing while the effects from the increased cost of living are now more prominent. Separately, the Office for National Statistics reported that Manufacturing and Industrial output declined by 0.2% in March, both missing consensus estimates. The UK goods trade balance data showed that the deficit unexpectedly jumped to £23.897 billion in March from £21.614 billion recorded in the previous month. The data reaffirmed a bleak economic outlook by the National Institute of Economic and Social Research warning that Britain is on course to enter a technical recession. This, in turn, suggested that the current rate hike cycle could be nearing a pause and dragged Sterling lower across the board. Brexit jitters put additional weight on the pound’s shoulders. A year has gone by with very little progress and the European Union is reportedly ready to suspend the trade deal with the UK if the Northern Ireland Protocol is revoked. USD The US dollar continued its recent bullish run and shot to its highest level since May 2020 amid firming expectations for a more aggressive policy tightening from the Federal Reserve. Wednesday’s release of the US CPI supported market bets for at least a 50 basis points rate hike at the upcoming policy meetings on June 15 and July 27. The prospects for rapid rate hikes in the US, along with increasing global supply chains challenges, fuelled worries about a possible recession. This uneasiness took its toll on the global risk sentiment, which was evident from an extended sell-off in the equity markets and further benefitted the safe-haven flow for the dollar.