GBP/USD Hits Two-Month High As UK Economic Indicators Surprise Markets
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The British pound (GBP) surged to a two-month high against the U.S. dollar (USD), buoyed by stronger-than-expected economic data from the United Kingdom. The move has sparked renewed optimism around the UK’s economic resilience and increased speculation about the Bank of England’s (BoE) next interest rate decision.
At the time of writing, GBP/USD is trading near 1.2850, marking a steady recovery from its June lows around the 1.2600 level. The pair’s bullish momentum was triggered by a combination of improved UK labor market figures, better-than-forecast GDP growth, and signs of moderating inflation.
The UK’s latest economic report showed that GDP expanded by 0.4% in May, beating expectations of 0.2%. In addition, unemployment held steady at 4.0%, while average earnings rose by 6.9%, suggesting that consumer spending remains relatively robust despite the ongoing cost-of-living pressures.
“This week’s data shows that the UK economy is more resilient than many had feared,” said Fiona Cincotta, a senior market analyst at City Index. “If inflation continues to slow and growth remains steady, the BoE could soon pivot to a more neutral stance, which may support the pound further.”
Adding to bullish sentiment was the weaker U.S. dollar, which came under pressure after Federal Reserve Chair Jerome Powell hinted at a more cautious approach to future interest rate hikes. His remarks, seen as slightly dovish, caused yields on U.S. Treasuries to decline and weighed on the greenback across the board.
As a result, currency traders saw the GBP/USD pair break key resistance levels around 1.2750, with some technical analysts now targeting a move toward 1.3000—a psychologically significant level not seen since early May.
However, risks remain. Some analysts warn that the BoE may still have work to do to bring inflation back to its 2% target, especially given persistent wage growth and sticky core prices. Any surprise in upcoming inflation readings could quickly reverse the pound’s gains.
“The rally in the pound is encouraging, but we’re not out of the woods yet,” said Viraj Patel, an FX strategist at Vanda Research. “Sticky inflation could delay rate cuts, and global risk sentiment remains fragile.”
For now, the focus will shift to the next UK CPI report and BoE Governor Andrew Bailey’s comments, both of which could provide more clarity on the central bank’s path forward. Until then, the pound may continue to ride the wave of positive data and USD weakness.
