The pound reached 1.3343 against the dollar on Friday, up over 1% this week, marking its highest level since March 2022. This increase followed stronger-than-expected British retail sales data for August, which showed a 1% rise, while July’s growth was revised up to 0.7% from a previous estimate of 0.5%.
GBP/USD maintained bullish momentum after a significant rate cut from the Federal Reserve and a pause by the Bank of England. The Fed’s rate cut weighed heavily on the dollar, which fell against most major currencies. Meanwhile, the Bank of England’s decision to hold rates after cutting them in its previous meeting provided further support for the pound.
The US dollar has remained under pressure after Wednesday’s Fed decision. While the Fed cut borrowing costs significantly, signalling confidence that inflation had been brought under control, concerns lingered about the potential economic implications. Federal Reserve Chair Jerome Powell stated that the cut was aimed at maintaining low unemployment, but some fear it may be a sign of future challenges for the US economy.
On Thursday, US unemployment claims dropped sharply, indicating tight labor market conditions, which bolstered hopes for a soft landing.
The Bank of England, however, kept interest rates steady on Thursday as expected. While UK inflation has eased, the central bank remains focused on service inflation, which exceeded estimates, adding caution to its outlook.
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