Sterling Strongest Since Mid-February as PM Starmer Holds On

The British pound climbed to around $1.333 on Friday, its strongest level since September 22, after stronger-than-expected UK economic data reinforced expectations of a possible Bank of England rate increase next month. GDP grew 0.1% in August following July’s 0.4% expansion, beating forecasts of a contraction, while output rose 0.7% over the three months to August. The economy’s resilience has strengthened the case for tighter monetary policy, with markets still largely anticipating a 25-basis-point hike on November 5, although expectations have eased slightly. Governor Andrew Bailey said there was limited evidence that higher energy costs were feeding into wages and broader prices, but warned it was too early to assess the full impact. Other policymakers have urged earlier action against inflation risks. Investors are also watching Chancellor John Healey’s upcoming budget, which aims to ease household pressures while maintaining plans to reduce the deficit.

The British pound strengthened to around $1.325 after data showed the UK economy grew more than expected in August, reinforcing speculation that the Bank of England could raise interest rates next month. GDP increased by 0.1% in August, following a 0.4% expansion in July and defying forecasts of a contraction. Output also rose 0.7% over the three months to August, marking the fourth consecutive month in which growth surpassed expectations. The figures suggest that businesses have remained resilient despite elevated energy costs and high borrowing expenses. Several Bank of England policymakers are monitoring the stronger activity data, particularly as the energy shock linked to the Iran war adds to inflation concerns. Attention now turns to Chancellor John Healey’s first budget on October 28, which comes amid tight public finances and market volatility. While the IMF has welcomed the government’s plans to reduce the deficit, pressure remains to ease household cost-of-living strains.

GBPUSD decreased to 1.32, the lowest since June 2026. Over the past 4 weeks, British Pound US Dollar lost 2.18%, and in the last 12 months, it decreased 1.64%.