Pound Edges Up as UK Service Sector Returns to Growth

The British pound strengthened modestly against several major currencies on Wednesday, including the yen, dollar, and euro. The gains came as investors took note of U.S. President Donald Trump's comments on diplomatic talks with Iran, which kept oil prices steady at around $80 a barrel.

According to Reuters, sterling rose 0.2% against the Japanese currency to 212.33 yen, while also strengthening against both the dollar and euro. David Stritch, a Caxton currency strategist, noted that the pound's lack of volatility has left it 'a little adrift of motivation'. However, the yen is nearing multi-month highs following recent intervention by Japanese and U.S. officials.

Separately, a survey by S&P Global showed that Britain's dominant services sector returned to growth in July, with new orders picking up and activity expectations reaching pre-Iran war highs. The survey attributed stronger growth projections for the year ahead to hopes of de-escalating Middle East tensions and easing inflationary pressures.

Meanwhile, UK Treasury officials are considering raising extra borrowing by using flexibility within the government's fiscal rules, potentially freeing billions for infrastructure, housing, and business investment. This move follows changes to fiscal rules made by former finance minister Rachel Reeves in 2024, which allowed for public sector assets to be taken into account when considering debt levels.