The British pound surged, reaching its highest level in seven months. This movement occurred despite the release of softer-than-expected UK inflation data. The pound’s strength is primarily attributed to a weakening US dollar, influenced by concerns surrounding the Federal Reserve’s independence and potential global trade war implications. UK inflation figures, while lower, have also influenced market expectations regarding future Bank of England monetary policy.
- The British pound climbed above $1.33, a seven-month high.
- The increase was mainly driven by a weaker US dollar.
- UK headline CPI slowed to 2.6% year-on-year.
- Services inflation eased to 4.7%.
- Traders slightly raised bets on rate cuts.
- Markets are pricing in 86 basis points of easing by year-end.
- There are growing odds of a fourth rate cut in December.
This performance for the British pound suggests a complex interplay of factors are at play. While domestic inflation data might suggest a dovish stance from the Bank of England, international pressures, particularly a depreciating US dollar, are providing significant upward momentum. Investors should consider the potential for further gains in the pound, though the Bank of England’s future actions will still play an important role.