Pound Strengthens on Surprise July Growth Boost

The UK pound strengthened against major currencies on Friday after the release of July's economic growth figures. The data showed that Britain's gross domestic product (GDP) grew by 0.4% in July, beating forecasts for no growth.

The services sector drove the increase, expanding by 0.4% month-on-month, while the pound rose 0.1% to $1.352 against the US dollar and gained a similar margin against the euro. The UK's economy expanded by 1% in the first half of the year, making it the fastest growth among G7 nations.

Economists, however, caution that seasonal adjustment issues may have overstated the figure, and some argue that the pace is likely to be revised lower. Despite these concerns, households and businesses continue to spend despite the energy shock weighing on disposable incomes.

The Bank of England's interest-rate outlook remains a topic of discussion, with traders nearly fully pricing in a November rate hike and expecting roughly three more increases by mid-2027. The 10-year gilt yield rose to its highest level since 2007 at nearly 5.4%, while the 30-year yield reached almost 6%, driven by energy-linked inflation fears.