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BNP Paribas has revised its UK economic growth forecast downward to 0.7% in 2026 from 1.4% in 2025, citing weaker quarterly momentum of around 0.1%. The bank also anticipates inflation rising to 3.4% before gradually easing, remaining above the Bank of England’s (BoE) 2% target. This projection highlights persistent inflationary pressures and slower economic activity, which could delay BoE rate cuts and prolong higher interest rates.
For forex markets, the GBP may face downward pressure due to the Bank of England’s constrained policy flexibility. Traders should monitor GBP/USD dynamics, as the pair could underperform against the USD amid divergent central bank policies. The UK’s economic slowdown also raises risks of a prolonged technical recession, increasing volatility in pound-based cross-currency pairs.
Investors should watch upcoming BoE inflation data and policy meetings for clues on rate trajectory adjustments. The BoE’s balance between combating inflation and supporting growth will shape GBP’s medium-term direction. Key focus areas include Q4 2024 inflation figures and the BoE’s response to wage growth and energy prices.
