The UK economy shrank by 0.3% in May, less than the 0.5% contraction expected by economists.

The decline was driven by a slowdown in services growth, which fell to 0.1% from 0.4% in April.

Manufacturing output also declined, falling to 0.1% from 0.5% in April.

The weaker-than-expected data could give the Bank of England more confidence to raise interest rates in August.

The pound rose against the dollar on the news, breaking above 1.30 for the first time since May 2022.

The euro also rose against the dollar, as investors sought out haven currencies amid renewed concerns about the global economy.

The ECB is also expected to raise interest rates in July, but the pace of tightening is likely to be slower than in the UK.

The weaker-than-expected UK data could also weigh on the euro, as it raises concerns about the economic outlook for the region.

The GBP/USD pair is likely to remain volatile in the near term, as investors weigh the prospects for monetary policy tightening in both the UK and the US.

The euro/dollar pair is also likely to remain volatile, as investors assess the risks to the global economy.