LONDON – Eng British pound there broke above the $1.3 level against the US dollar for the first time in the year, as the investor bank at the time of the coming of policies-friendly growth and political stability in the newly elected Labor government.
Sterling was 0.49% higher at $1.3027 at 9:55 am in London (4:55 am ET), hitting its highest level since July 19, 2023.
UK inflation came within the Bank of England’s 2% target for the second straight month, figures published earlier on Wednesday showed.
However, the inflation print slightly dampened market bets on an August rate cut from the central bank due to the stickiness of the main services print. Higher rates tend to increase the currency’s attractiveness.
Pound Meanwhile up 0.07% against eurosin 1.1908.
The British currency has also been supported by a recent landslide parliamentary victory for the Labor Party, according to analysts.
“With strong economic data coming out of the UK in recent weeks, along with a stable UK political ‘safe harbour’, the likelihood of an imminent rate cut in August has diminished and sterling has made strong gains,” said Joe Tuckey, head of FX analysis at Argentex, said in an email comment.
GBP/USD.
“Inflation data steady this morning at 2% came in just more than expected, can only serve to slightly reduce the chance of August cut, and perhaps underpin the strength of the new sterling.”
Sterling is the only currency to outperform the U.S. dollar year to date in the G10 group of advanced economies and was the second-best performer last year, Jane Foley, chief FX strategist at Rabobank, told CNBC’s “Squawk Box Europe” on Wednesday.
This comes in the context of the British pound-US dollar trade falling to its lowest level in September 2022 amid the previous UK government’s “mini budget crisis”, Foley added.
“Sterling is starting to pull back, and there’s a lot of optimism, I think right now, that maybe with more stable politics, we can start to get a better tone on investment,” Foley told CNBC.
“We’ve seen the right voice from (new finance minister) Rachel Reeves about trying to boost growth, trying to get the private sector to drive investment and productivity. So, (there’s) a right voice so far, (and) maybe it’s the honeymoon period , we’ll have to wait and see.”
He added, “it seems that some see that politics remains boring, and to be fair, last year, investment growth could return.”
