GBP Bounces on Broad USD Weakness Despite Mixed UK Data
The British Pound (GBP) has shown resilience against the US Dollar (USD) despite mixed economic data from the United Kingdom. According to Brown Brothers Harriman's Elias Haddad, GBP/USD is firmer due to broad USD weakness.
Haddad notes that July retail sales declined by 0.5% month-over-month, partially reversing strong gains seen in previous months. However, the August PMI (Purchasing Managers' Index) surprised to the upside with a four-month high composite reading of 52.5, reflecting a sustained turnaround in service sector activity.
Haddad believes that market pricing of 50 bps Bank of England (BoE) hikes over the next twelve months is too aggressive, considering the UK's negative output gap. Nevertheless, the favorable growth-inflation mix continues to offer support to the Pound.