Pound Strengthens to Highest Level Since June, UK Awaits New PM
The British pound strengthened to US$1.343 against the US dollar on Friday (July 10th), its highest level since mid-June. This strengthening also marked the second consecutive weekly gain for sterling against the greenback.
The pound's rise was driven by expectations that the Bank of England will raise interest rates later this year. Currency markets currently price in at least one rate hike, with a roughly 25% chance of a second hike.
Sterling has rebounded more than 2% since hitting a seven-month low in late June. This recovery occurred after Labour Prime Minister Keir Starmer announced his resignation, prompting markets to begin assessing the direction of Britain's new leadership.
Andy Burnham is expected to take over as Labour leader after the leadership contest ends on Friday, July 17th. He is also expected to officially become prime minister on Monday, July 20th.
From a market perspective, the pound's strengthening reflects optimism about the outlook for UK interest rates and a political transition that is beginning to become clearer. However, risks remain from Brent oil prices, which briefly hit a two-week high due to the re-escalation of the US-Iran conflict. Because the UK relies heavily on energy imports, the UK market remains sensitive to spikes in oil prices, which could depress inflation and influence the Bank of England's policy direction. (asd)
Source: Newsmaker.id
