The pound sterling has reached its highest level in a year due to strong economic growth and lessened expectations of an interest rate cut by the Bank of England. The Office for National Statistics stated a 0.4% growth in May and a 0.9% growth in the past 3 months, the highest since January 2022. This reboot has cast doubt on whether the Bank of England will cut interest rates next month, at a 16-year high of 5.25% since December.
Market expectations of an August rate cut have fallen from 60/40 to 50/50, with Bank of England officials showing concerns about underlying inflation pressures. The pound’s increase day by day was also boosted by a fall in US inflation, which dropped to 3% in June, weakening the dollar. The UK’s economic recovery and stable government under the new Labour majority have contributed to the pound’s strength, with some analysts predicting that the UK now has the most stable government in the G7 over the upcoming 5 years.
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The powerful economic growth and reduced expectations of a rate cut have led to a stronger pound, which has impeded the UK economy, interest rates, and the global currency market. As the Bank of England takes its next move, the pound will likely remain volatile, responding to economic data and interest rate expectations. The UK’s financial outlook and monetary policy decisions will continue to affect the pound’s value, making it an important currency to watch in the coming months.
Global head of FX research at UBS Investment Bank in New York, Shahab Jalinoos, said: ‘The UK now has feasibly the most stable government in the G7 over the next 5 years, due to the size of the majority.’
By Daily Mail news
