The UK\u2019s year-on-year gross domestic product (GDP) growth was 1% in the fourth quarter.<\/p>\n
This was below the forecast of 1.2%.<\/p>\n
The final Q4 2025 gross domestic product figure, coming in at 1.0% year-on-year, confirms the economic slowdown we have been anticipating. This miss against a 1.2% forecast puts immediate pressure on the Bank of England to reconsider its timeline for monetary easing. Consequently, the upcoming March Monetary Policy Committee meeting is now a key event to watch.<\/p>\n
We see this data as a clear signal for continued weakness in Sterling over the coming weeks. With the latest January 2026 inflation report showing CPI has fallen to 2.3%, the Bank has more room to act. Traders should consider buying GBP\/USD puts expiring in April to position for a potential rate cut, as overnight swaps are now pricing a 65% chance of a cut in March, up from 40% last week.<\/p>\n
For equity markets, the FTSE 100 may prove resilient as its multinational companies benefit from a weaker pound. However, the domestic-focused FTSE 250 index looks far more vulnerable to the underlying economic weakness. A pairs trade, going long FTSE 100 futures and short FTSE 250 futures, could be an effective way to navigate this divergence.<\/p>\n
The most direct trade is in UK government bonds, where we expect yields to fall further as the market prices in a more dovish central bank. This GDP report follows the weak December 2025 retail sales figures we saw last month, which showed a 0.8% contraction. This reminds us of the pattern in late 2023, when similar recessionary fears prompted a sharp rally in Gilts.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" UK GDP grew 1% year-on-year in Q4, missing forecasts of 1.2% for the quarter overall.<\/p>\n","protected":false},"author":62,"featured_media":17031,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-41683","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\n\t\t