British Pound Strengthens Ahead of BoE Rate Decision
The British pound, or the sterling, edged closer to $1.35, remaining near its highest levels since 2022, continuing to benefit from broad-based US dollar weakness. Inflation and economic concerns are expected to affect the Bank of England’s decision on rates on Thursday.
FX traders said Sterling’s gain was noted to be supported by the latest UK inflation data, which showed that price pressures remain elevated. GBPUSD rose to 1.3449 from 1.3428 at the Tuesday US close but was well below a level of 1.3566 at the same time Tuesday morning.
UK consumer prices rose as expected in May, but the year-over-year rate slowed from the previous month, data released earlier Wednesday showed. Economic data revealed that the annual inflation rate came in at 3.4% in May, in line with expectations and just below April’s 3.5%.
Notably, the April figure would have been 3.4% as well had it not been for a miscalculation in the Vehicle Excise Duty series. Core consumer price index rose 3.5% year-over-year in May, down from April’s 3.8%.
The moderation offers some relief but leaves inflation well above the Bank of England’s 2% target. UK Finance Minister Rachel Reeves took a cautiously optimistic tone, crediting government efforts for stabilizing public finances while warning, “There’s more to do.” Markets read that as a nod to persistent economic headwinds.
The data reinforced market expectations that the Bank of England will keep interest rates unchanged at its upcoming meeting Thursday, while still leaving the door open for a 25 basis point cut in August.
Meanwhile, the Bank of England is expected to leave interest rates unchanged on Thursday amidst economic headwinds. Headline inflation eased only slightly in the U.K. last month, dropping to 3.4% from 3.5% in April, figures show Wednesday.
But services inflation eased more notably, hitting 4.7% from 5.4% previously, in an encouraging sign for BOE policy #British Pound Strengthens Ahead of BoE Rate Decision Equities Investors’ Portfolio Value Rises by N512bn as Heavyweights Rally
