The British pound strengthened significantly, reaching a five-week high against the dollar. This upward movement followed the release of stronger-than-anticipated UK economic data, including GDP and employment figures, which dampened expectations of further interest rate cuts by the Bank of England. Simultaneously, a weakening dollar, spurred by US inflation data, further supported the pound’s appreciation.
- The British pound traded at $1.36, a five-week high.
- UK Q2 GDP grew by 0.3% against an expected 0.1%, with annual growth at 1.2%.
- June GDP rose by 0.4%, exceeding expectations.
- Stronger GDP data lowers the likelihood of near-term Bank of England rate cuts.
- A recent vote showed a narrow 5-4 majority within the Bank of England to cut rates by 25 bps.
- July payrolls fell by 8,000, much better than the anticipated 20,000 drop.
- Unemployment remained at 4.7%.
- Private-sector wage growth slightly decreased to 4.8%.
- The dollar weakened due to US inflation data, increasing expectations of a September Fed rate cut.
The positive economic indicators out of the UK are driving increased value for the pound. Better-than-expected growth and employment figures are providing tailwinds for the currency. The combination of this positive data and a weakening dollar environment presents an opportunity for the pound to maintain its strengthened position, particularly as the likelihood of further near-term easing from the Bank of England diminishes.