Pound Holds Ground as Economic Growth Surpasses Expectations in UK
UK Economic Performance and Market Reactions
LONDON, Aug 13 (Reuters) - The pound held steady on Thursday and remained on track for a third weekly gain as burgeoning confidence in the UK economy was reinforced by data that showed growth unexpectedly picked up in June.
Money markets show traders still expect one rate rise from the Bank of England this year, and Thursday's economic data did little to shift that.
Growth Data and Contributing Factors
The Office for National Statistics said UK gross domestic product rose by 0.3% during the month, putting Britain on course for the strongest growth among the Group of Seven rich economies in the first half of 2026, after being flat in May.
Consumer Activity and External Influences
Households and businesses enjoyed some respite from high energy prices caused by the Iran war in June, while the start of the men's soccer World Cup and hot weather helped boost overall economic activity.
Sterling was last unchanged on the day against the dollar at $1.349 and against the euro, which traded at £0.8547.
Investor Sentiment and Analyst Insights
Sources of Growth
Although growth was modest, it was mostly the product of consumer spending and business investment, rather than government spending, which could prove encouraging for investors, Jeremy Stretch, who is head of G10 FX strategy at CIBC Capital Markets, said.
Expert Commentary
"Putting your head under the bonnet of the UK economy suggests that the momentum is perhaps a little more robust and a little more dynamic than we might have assumed," he said.
Looking Ahead: Inflation and Monetary Policy
Next week brings a raft of inflation data that could be more influential in setting expectations for BoE monetary policy.
"Despite the ONS estimated strength of growth in H1, we don't think it will shift the BoE’s assessment. The BoE will still view the UK economy as operating with slack that supports domestic disinflation at present," RBC Capital Markets said.
(Reporting by Amanda Cooper; Editing by Andrew Heavens)
