Pound holds firm on strong data and BoE

Daily Currency Update

The pound closed the week up 0.7% against the dollar, touching $1.3594 — its highest since early July — supported by stronger-than-expected Q2 GDP (+0.3%), steady wage growth, and a Bank of England that cut rates but kept a hawkish tone on inflation. A softer dollar, with traders pricing in Fed cuts, added momentum. Still, weak business investment and underlying structural issues temper sterling’s rise.

In the eurozone, growth remains sluggish with ECB forecasts of 0.9% in 2025 rising modestly through 2027, while inflation dips below 2% before stabilising. EUR/USD stayed under pressure as trade headwinds, tariffs, and competitiveness concerns dragged sentiment, though stable rates keep the euro relatively steady.

The U.S. dollar faces conflicting forces: stronger PPI (+0.9% in July) and rising Treasury yields lifted it short term, but political interference with Fed leadership, deficits, and credibility worries keep sentiment bearish. Many analysts expect EUR/USD to push toward 1.17 by October and possibly 1.20 within a year, with some banks warning of a prolonged dollar slide.