UK GDP increased 0.1% in August 2026, exceeding expectations for a 0.1% contraction after July’s unrevised 0.4% expansion. Output grew 0.7% over the three months to August, suggesting the economy retains momentum despite higher borrowing costs. The figures were released on October 15.
Markets anticipate a 25-basis-point Bank of England increase on November 5, but this remains an expectation. On October 16, Governor Andrew Bailey described broader inflation effects from energy costs as subdued so far, while cautioning that the evidence remains incomplete.
Could stronger growth lift GBPUSD further?
Resilience reduces the growth-related obstacle to tighter policy, potentially supporting UK yields and sterling. However, an anticipated increase offers less fresh upside. Upcoming inflation and wage figures could sustain that support; softer readings or stronger US data could reverse it.
What could the budget mean for UK equities and bonds?
Chancellor John Healey’s budget will test the balance between household relief and fiscal discipline. Credible funding could reassure bond investors. Measures that increase borrowing concerns could instead lift yields and pressure rate-sensitive equities. Initial currency moves may reverse if rising yields reflect fiscal risk rather than stronger policy credibility.
