Pound Strengthens on Strong UK Growth Amid Energy Price Pressures
The British pound strengthened on Friday as investors digested stronger-than-expected UK GDP data and growing expectations for further Bank of England rate hikes. The pound edged higher to around $1.352, surpassing forecasts.
UK GDP grew 0.4% month-on-month in July, with services leading the expansion. Over three months, growth matched the prior period at 0.4%. This data comes as energy prices remain high, with Brent crude near a four-month high and UK natural gas prices hovering near a three-and-a-half-year high.
Markets are now fully pricing in four BoE rate increases by the end of 2027, although Governor Bailey has noted that future decisions depend on economic and geopolitical conditions. The dollar traded near the flat line ahead of a key US CPI report due later today.