Pound Sterling Hits Three-Month High as Dollar Index Fluctuates Lower

The US Dollar Index has been fluctuating lower in recent days, while the pound sterling continues to rise against it. The pound reached a three-month high of 1.3550 last Friday and has since maintained its upward momentum. According to data from Moomoo, broad-based selling pressure on the greenback remains evident, which is driving the pound's strength.

The recent UK economic data releases have provided support for the pound. The UK GDP grew by 0.3% month-on-month in June and 0.4% in the second quarter, indicating that economic activity retained some resilience. This has alleviated market concerns about a rapid stall in the British economy.

However, the current rise in the pound is not without risks. Energy price volatility could still push UK inflation higher again and increase the complexity of the Bank of England's policy decisions. A rapid rise in energy prices might boost inflation expectations in the short term but could compress household real income and consumption capacity in the long run.