The UK economy grew 0.3% in Q2 2025, exceeding expectations but marking a slowdown from the 0.7% expansion in Q1. Growth was driven by services, manufacturing, and construction, with June alone posting a stronger-than-forecast 0.4% rise. However, this performance came despite fiscal tightening and global trade tensions, suggesting underlying resilience. Chancellor Rachel Reeves welcomed the figures but faces a daunting Autumn Budget amid a projected £20bn fiscal shortfall, likely requiring tax hikes. Meanwhile, the Bank of England's recent 0.25% rate cut to 4% remains in focus, with traders cautious about further easing due to persistent inflation. Following the GDP release, sterling edged up slightly to $1.357, while market reaction stayed muted as investors prioritise inflation and labour data over growth alone.