Sterling's Resurgence: A Services Sector-Backed Rebound
Sterling rose against the dollar due to positive performance in the UK's services sector, although its gains were short-lived. Analysts believe the rise in airfares contributed to the boost rather than broad price pressures. While money markets predict no immediate rate cuts, Sterling emerges as a prime candidate for carry trade strategies.
The British pound saw a notable rise against the U.S. dollar on Thursday, boosted by a promising performance from the UK's services sector, marking its best month in the past year. This development comes as investors turn their attention to the Federal Reserve's upcoming Jackson Hole symposium.
Sterling appreciated by 0.2% to reach $1.3483, while also seeing a slight increase against the euro at 86.57 pence per euro. Despite the favorable services data, only temporary gains followed, as analysts attributed the uptick mainly to rising airfare costs rather than overarching inflation pressures.
With the Bank of England's policy outlook remaining relatively unchanged, financial markets are factoring in less than a 50% chance of a rate cut before 2025. Sterling is positioned as a strong carry trade contender, reminiscent of the high-yielding U.S. dollar, highlighting its continued appeal in global currency markets.
(With inputs from agencies.)
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