GBP: UK economic activity surprises to the upside – BBH

GBP/USD recovered above 1.2500 and fell below that point shortly after that, BBH's FX analysts report.

BOE forecasts real GDP at just 0.1% q/q

"Monthly real GDP grew 0.4% in December (consensus: 0.1%) vs. 0.1% in November largely driven by growth in the service sector. On a quarterly basis, preliminary real GDP unexpectedly rose 0.1% q/q (consensus: -0.1%) vs. 0% in Q3 but the details were unimpressive."

"There was no growth in real household expenditure and gross fixed capital formation fell. Inventory restocking was the main growth driver while net trade the biggest drag."

"Beyond Q4, the Bank of England’s (BOE) macroeconomic projections point to near-term stagflation conditions which is a drag for GBP. For Q1 2025, the BOE forecasts real GDP at just 0.1% q/q and CPI inflation at 2.8% y/y."