The British pound inched up to around $1.352 on Friday as investors assessed stronger-than-expected UK GDP figures and increasing expectations of further Bank of England interest rate hikes. UK GDP expanded 0.4% month-on-month in July, beating forecasts, with the services sector driving the gains. Over the three months to July, growth held steady at 0.4%, matching the previous three-month period.
At the same time, the recent rally in energy prices took a breather, though Brent crude remained close to a four-month high and UK natural gas prices hovered near their highest level in three and a half years, reinforcing concerns about renewed inflationary pressures. Markets are now fully pricing in four BoE rate increases by the end of 2027, although Governor Bailey has recently emphasized that future policy decisions will depend on evolving economic and geopolitical conditions.
The US dollar, meanwhile, was little changed ahead of a closely watched US CPI report due later in the day. Stronger-than-expected US producer price data released on Thursday have heightened expectations that the Federal Reserve could raise interest rates at its meeting next week.
