The British pound experienced a modest gain against the dollar, reaching $1.347, fueled by positive data indicating a strong performance in UK businesses, particularly within the services sector. While recent inflation figures initially provided a fleeting boost to the pound, analysts suggest that the data is unlikely to significantly influence the Bank of England’s monetary policy decisions.
- The British pound gained to $1.347.
- UK businesses experienced their strongest month in a year.
- The rebound was driven by the services sector.
- Inflation data had a brief, limited effect on sterling.
- Inflation mainly reflected higher airfares.
- Money markets see less than a 50% chance of a rate cut before end-2025.
- There is only about a 36% probability of a quarter-point reduction this year.
- The next rate cut is likely priced in for spring 2026.
- Sterling has risen nearly 8% against the dollar in 2025.
This suggests that the British pound’s recent strength is primarily due to underlying economic activity, specifically the resurgence of the services sector, rather than inflationary pressures. The market’s anticipation of future monetary policy actions by the Bank of England is also subdued, with expectations for rate cuts pushed further into the future. Overall, this paints a picture of a currency supported by tangible economic improvements and a cautious approach from the central bank.