Sterling Strengthens as UK Economic Data and Rate Outlook Loom
Market Movements and Economic Indicators
By Niket Nishant
Sterling's Recent Performance
Aug 17 (Reuters) - The pound rose on Monday as investors awaited a batch of inflation and labour market data that could put the currency's recent gains to the test.
Sterling rose 0.21% against a weaker dollar to $1.3560 after three consecutive weekly gains. It was also trading 0.06% higher at 85.50 pence per euro.
Upcoming Data and Bank of England Outlook
The inflation and labour market readings due later this week will be crucial to the Bank of England's interest rate outlook and could determine whether sterling can extend its recovery after a period of political turmoil in the UK.
Economic Growth Factors
The currency was boosted by data last week that showed the British economy had grown unexpectedly in June thanks to the start of the men's soccer World Cup, hot weather and respite from the energy price surge.
Labour Market Sentiment
However, a survey published on Monday showed that employers remain reluctant to hire and confidence has held near its weakest levels outside the COVID-19 pandemic.
External Influences on the Pound
Oil Prices and Global Tensions
"Policymakers are likely to focus on the broader trend rather than any single data point," said Derek Holt, head of capital markets economics at Scotiabank.
The relief from lower crude oil prices in June could also be temporary, given the latest flare-up in Middle East tensions. Iran called on the U.S. to accept defeat while President Donald Trump told Americans to prepare for continued high fuel prices.
Household Impact
"All the focus is back on oil prices. Households could yet interpret sticky energy prices as more permanent," Pantheon Macroeconomics economists wrote.
Interest Rate Expectations
Traders are pricing in at least one increase to interest rates by the Bank of England this year, according to data compiled by LSEG.
Central Bank Commentary
The central bank's chief economist, Huw Pill, told the Wall Street Journal last week that stronger than expected economic growth reinforced the case for higher borrowing costs.
(Reporting by Niket Nishant in BengaluruEditing by David Goodman)