The British pound is leading all major currencies this year, buoyed by expectations that the Bank of England will keep interest rates high for longer.
The pound reached its price peak on Thursday and outpaced all other major currencies. As the UK’s economic condition improved through new political stability, it also hit its highest level since July 2023, up 0.8% at $1.2949.
The recent surge was triggered by U.S. inflation cooling data last month, and reports show that the UK economy grew twice the expected rate in May. While some central banks have already cut interest rates, some are still working conservatively due to high inflation and a tight job market.
Experts have analyzed the Labor Party’s landslide victory, which is set to end years of political turmoil in the UK. In response, Goldman has recommended buying pounds, predicting that the currency could rise to $1.30 within the next two weeks.
Shahab Jalinoos, global head of FX research at UBS Investment Bank in New York, said, “The UK now has arguably the most stable government in the G7 over the next five years due to the size of the majority. We think the GBP should finally see the tide of structural flows move in its favor for the first time in the post-Brexit-vote era.”
The money market is currently pricing in a 50% chance of a cut in August and expects a 49 basis point of easing by the end of this year. This is about 10 basis points less than the Federal Reserve predicted for 2024.
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