The British pound experienced a significant rise, reaching a five-week high against the dollar. This movement was primarily driven by stronger-than-anticipated UK economic data, which has tempered expectations of further monetary easing by the Bank of England and coincides with a weakening dollar due to speculation about a potential Federal Reserve rate cut.
- The British pound traded at $1.36, the highest in about five weeks.
- UK GDP grew by 0.3% in Q2, exceeding the forecast of 0.1%, with annual growth at 1.2%.
- June GDP also outperformed expectations, increasing by 0.4%.
- The stronger data reduces the likelihood of further Bank of England rate cuts in the near term.
- Payrolls fell by only 8,000 in July, significantly better than the anticipated 20,000 drop.
- The unemployment rate remained steady at 4.7%.
- Private-sector wage growth saw a slight decrease to 4.8%.
- The dollar weakened following US inflation data, increasing bets on a September Fed rate cut.
The observed economic indicators suggest a strengthening British economy, which is contributing to the pound’s appreciation. The outperformance in GDP and employment figures is leading to a reassessment of the need for further monetary stimulus, bolstering confidence in the currency. This is further supported by weakness in the dollar, creating a more favorable environment for the British pound.