Sterling's Surge: Economic Growth Defies Forecasts

The British pound advanced against the U.S. dollar on Thursday, buoyed by data revealing faster-than-anticipated economic growth in the UK. This growth strengthens the argument for fewer interest rate cuts from the Bank of England, as Sterling appreciated by 0.2% to $1.327, amidst waning enthusiasm for the recent U.S.-China trade deal.

Data indicated the UK's economy expanded by 0.7% from January to March, a significant rise from the previous quarter's 0.1% growth, and surpassing both Bank of England and Reuters' forecasts of 0.6%. Despite this positive trend, finance minister Rachel Reeves warned of economic headwinds, partly owing to the impact of a global trade war and increased UK employment taxes.

While UK-U.S. trade talks suggest lowered tariffs, the UK's openness makes it vulnerable to global slowdowns, emphasized senior economist George Brown. Furthermore, recent comments from BoE policymakers have led to a reassessment of anticipated rate cuts, with money markets reducing their predictions from 70 to 44 basis points by year's end.

(With inputs from agencies.)