Sterling traded well yesterday and has managed to sustain its gains as better-than-expected GDP figures were released this morning. The Office for National Statistics (ONS) printed a 4.8% rise in UK economic growth between April and June. Thus, the UK economy is now 4.4% smaller than it was before the pandemic and only 0.2% below the Bank of England (BoE) expectations. While just missing forecasts, the expansion of GDP “is consistent with the Bank of England's own forecasts for a robust rebound in economic activity in 2021, which could allow for an interest rate rise in 2022… the Bank last week effectively rubber-stamped the market's expectation for a 2022 interest rate rise, a development that has been met with broad-based gains in the British Pound.” Sterling this morning is showing great resilience against the Euro to maintain itself above 1.18.
In regard to Cable, the Dollar softened yesterday afternoon as latest US CPI figures indicate inflation to be, as the FOMC have described, transitory. Despite being forecast at 0.4%, Core Inflation MoM for July came out at 0.3%, and Inflation Rate fell to 0.5% from a previous of 0.9%. While this brought downside to the Greenback the expected rise in Treasury yields has helped underpin the US Dollar. Looking ahead, the Jackson Hole Economic Symposium in late August will likely be the next time markets see heightened volatility.
Cable opened on Wednesday at 1.3826 and as the day progressed was able to make subtle gains. As the Dollar dropped off amid yesterday’s CPI release, GBPUSD managed to capitalize, closing off the day at 1.3866.
GBPEUR also made minor gains yesterday. The pair opened the session at 1.1800 and closed at 1.1812.
A weaker Dollar also allowed for EURUSD gains. Starting at 1.1716, the pair was able to finish the day at 1.1738.