GBP Rises as Dollar Weakens Amid Inflation Fears
The British pound (GBP) has been gaining strength against the US dollar (USD), largely due to the weakening of the latter amidst rising inflation concerns and uncertainty over Prime Minister Andy Burnham's spending plans. The USD eased ahead of this week's Consumer Price Index (CPI) release, which could boost expectations for a 25 basis point rate hike by the Federal Reserve at its September meeting.
Finance Minister John Healey's pledge to maintain fiscal discipline has also contributed to sterling's resilience, with the 10-year gilt yield hovering around 5.15%. This is a welcome relief after the 10-year gilt yield reached its highest level since 2008 last week.
UK firms have increased full-time hiring in August for the first time in four years, according to recent data. The Bank of England (BoE) is not expected to raise interest rates next week, but market expectations suggest a hike before the end of the year could provide further support to GBP/USD.