UK GDP rose by 0.6% quarter on quarter in Q1. This matched expectations.
The data points to continued growth after earlier weakness. No other figures were provided in the source.
Market Reaction And Volatility
The first quarter GDP figure of 0.6% landed exactly on expectations, meaning the news was already priced into the market. As a result, we saw implied volatility on sterling and FTSE 100 options decrease right after the announcement. The lack of a surprise removes a major short-term risk event.
With this steady growth confirmed, attention now shifts entirely to the Bank of England’s next move on interest rates. This 0.6% figure, the strongest since early 2024, makes it much harder for the Bank to justify an imminent rate cut. Overnight Index Swaps now indicate the market is pricing in less than a 25% chance of a rate cut before the August meeting.
For traders of the FTSE 100, this stable economic picture provides a supportive floor for UK stocks. With the immediate event risk gone, selling out-of-the-money puts to collect premium could be a viable strategy in the coming weeks. We are looking at an environment where economic stability may limit significant downside, even if higher rates cap the upside.
For currency traders, this data reinforces sterling’s strength, particularly against currencies like the euro where the ECB is signalling a more dovish stance. The prospect of UK rates staying higher for longer should support the pound. Looking back at how the pound reacted during 2025, it consistently gained when UK economic data surprised to the upside or simply showed resilience.
For currency traders, this data reinforces sterling’s strength, particularly against currencies like the euro where the ECB is signalling a more dovish stance. The prospect of UK rates staying higher for longer should support the pound. Looking back at how the pound reacted during 2025, it consistently gained when UK economic data surprised to the upside or simply showed resilience.
Sector Breakdown And Pair Trade Ideas
Digging into the details, we see the growth was driven heavily by the services sector, which expanded by 0.7% in the quarter. However, industrial production remained flat, continuing a trend of weakness we observed through the second half of 2025. This divergence suggests potential for pairs trades, favouring service-oriented companies over industrial ones.
