UK GDP contracts 0.5% MoM in July vs. -0.2% expected

• UK GDP arrived at -0.5% MoM in July vs. -0.2% expected.
• GBP/USD drops further below 1.2500 on downbeat UK GDP data.

According to the latest data released by the Office for National Statistics (ONS) on Wednesday, the UK economy shrank 0.5% in July, following a 0.5% expansion in June. The market consensus was for a 0.2% contraction.

Meanwhile, the Index of services (July) came in at 0.1% 3M/3M vs. -0.1% estimate and 0.1% prior.

Market reaction                                                         

The GBP/USD pair is extending losses on the UK GDP data release. At the press time, the spot is down 0.14% on the day to trade at 1.2466, awaiting the US inflation data for further cues.

About UK GDP

The Gross Domestic Product released by the National Statistics is a measure of the total value of all goods and services produced by the UK. The GDP is considered a broad measure of the UK economic activity. Generally speaking, a rising trend has a positive effect on the GBP, while a falling trend is seen as negative (or bearish).