UK Economy Contracts as Trade Worries Intensify

New data released on July 11 revealed the UK economy contracted in May, failing to recover from its previous downturn. Manufacturing and construction led the weakness, while services offered muted lift. The output decline comes amid growing concern over U.S. tariffs, which are intensifying strain on UK exporters and market sentiment.

The contraction reinforced expectations that the Bank of England may soon consider interest rate cuts to support growth. With inflation cooling, policymakers face delicate trade-offs between sustaining the recovery and managing inflation expectations.

For investors, the key takeaway is the heightened sensitivity of UK assets to trade dynamics. Currency fluctuations and bond yields may shift further if the growth slowdown deepens and monetary policy turns more accommodative.