Pound Edges Lower as OECD Cuts UK Growth Forecast

By: Swarnalata

Published on: Jun 03, 2025

The British pound slipped against the dollar on Tuesday, declining nearly 0.2% to $1.3519, following a downward revision in the UK’s economic growth forecast by the Organisation for Economic Co-operation and Development (OECD). The OECD’s latest report paints a cautious picture of the global economy, warning of an “increasingly challenging” outlook. The organization now projects global GDP growth to slow from 3.3% in 2024 to 2.9% in both 2025 and 2026, driven by a technical assumption that tariff rates as of mid-May 2025 will persist despite ongoing legal challenges.

For the UK specifically, the OECD revised its growth forecast downward to 1.3% for 2025, from a previous estimate of 1.4%, and further to 1% for 2026, down from 1.2%. This downgrade reflects broader global economic headwinds, with the slowdown most pronounced in the United States, Canada, and Mexico, while China and other economies face smaller adjustments. Russ Mould, investment director at AJ Bell, noted that while the global forecast cut is modest, it still prompts investors to reassess their positions as they digest the implications.

Trade Tensions and Tariffs Weigh on Markets

The OECD’s projections come amid heightened uncertainty surrounding global trade policies, particularly following U.S. President Donald Trump’s aggressive tariff measures. Markets have been volatile since Trump introduced sweeping tariffs in April 2025, with a federal appeals court recently pausing a ruling that would have deemed most of these tariffs illegal. The Trump administration faces a deadline of June 9, 2025, to respond to the court, adding to the uncertainty. Additionally, a 90-day tariff pause is set to expire in just over a month, pressuring countries to negotiate trade deals with the U.S. Reports suggest Trump is pushing for “best offers” by Wednesday to avoid last-minute stalemates.

China has already pushed back against Trump’s claims of trade agreement violations, while the European Union has expressed opposition to the doubling of tariffs on steel and aluminum imports. These developments have contributed to market jitters, with the dollar index (DX-Y.NYB) rising 0.2% to 98.91, despite a 0.9% decline over the past five sessions. A stronger