Pound at One-Month High on Strong Data
Sterling held above $1.335, its highest level in a month, as stronger-than-expected UK economic data reinforced expectations of a Bank of England rate hike next month. UK inflation climbed to 3.5% in September, its highest level since October 2025, exceeding forecasts of 3.4%, driven by motor fuels. Core and services inflation also came in above expectations. Public sector net borrowing reached £24.5 billion, higher than forecast, ahead of next week’s budget. The data follow signs of a resilient economy, including an unexpected fall in unemployment, 0.1% GDP growth in August and a narrower trade deficit. Markets are now fully pricing in a 25-basis-point increase in Bank Rate in November. The central bank has so far been the only major central bank yet to begin a policy-tightening cycle. However, Governor Andrew Bailey’s recent remarks suggesting that a prolonged war could increase pressure on policymakers to act suggest that a rate hike may be approaching.
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Sterling held above $1.335, its highest level in a month, as stronger-than-expected UK economic data reinforced expectations of a Bank of England rate hike next month. UK inflation climbed to 3.5% in September, its highest level since October 2025, exceeding forecasts of 3.4%, driven by motor fuels. Core and services inflation also came in above expectations. Public sector net borrowing reached £24.5 billion, higher than forecast, ahead of next week’s budget.
The data follow signs of a resilient economy, including an unexpected fall in unemployment, 0.1% GDP growth in August and a narrower trade deficit. Markets are now fully pricing in a 25-basis-point increase in Bank Rate in November. The central bank has so far been the only major central bank yet to begin a policy-tightening cycle. However, Governor Andrew Bailey’s recent remarks suggesting that a prolonged war could increase pressure on policymakers to act suggest that a rate hike may be approaching.