The British pound is trading near multi-week highs against the US dollar, supported by a weaker dollar and stronger-than-expected UK economic data. Rising shop prices are fueling inflation concerns, potentially limiting the Bank of England’s ability to cut interest rates. UK economic data is showing strength, as well.
- The British pound traded above $1.365, near its strongest level since early July.
- Shop prices in the UK rose 1.5% year on year in January, the sharpest increase since February 2024.
- The Composite PMI jumped to 53.9 in January from 51.4 in December, beating estimates.
- The Services PMI came in at 54.3, higher than estimates.
- The Manufacturing PMI rose sharply to 51.6 from 50.6.
- Retail Sales figures grew in December by 0.4% month-on-month.
- On an annualized basis, Retail Sales grew strongly by 2.5%.
The British pound is demonstrating resilience and gaining ground against the US dollar, fueled by positive domestic economic indicators. Stronger-than-expected PMI and retail sales data suggest a robust economy, reducing expectations for near-term interest rate cuts by the Bank of England. Inflationary pressures, as indicated by rising shop prices, further support this outlook. These factors combined are contributing to the pound’s upward trajectory.