GBP Boosted by Hawkish Tone, But UK GDP Data to Reveal True Strength

The British Pound (GBP) is trading higher against its major currency peers, reaching around 1.3500 against the US Dollar (USD) during Monday's European session.

The outperformance of the pound seems unlikely to sustain as traders remain confident that the Bank of England (BoE) will not hike interest rates in the near term, despite rising oil prices and global inflation expectations.

Rabobank analysts note that while the Monetary Policy Committee delivered a more hawkish voting split than expected, Governor Bailey's communication was cautious, with his tone described as dovish, suggesting little support for the pound from the BoE.

The UK Q2 GDP data release on Thursday will be a major trigger for the Pound Sterling, with expectations pointing to a 0.4% pace of economic expansion, slower than the previous reading of 0.6%, and a 0.1% decline in June's GDP on a monthly basis.