The GBPUSD currency pair was trading up over 103 pips as the Sterling pound rallied higher against the US dollar, driven by factors such as the upbeat UK GDP data released earlier today. The UK GDP shrunk by 0.1% in June, beating analysts' estimates of a 0.3% decline.
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The currency pair was also boosted by the bullish comments from UK Finance Minister Jeremy Hunt, who said that high inflation continues to hamper economic growth after the latest data showed that the economy contracted in May. The minister also attributed the GDP decline to the extra bank holiday in May.
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Investors piled into the Sterling pound and pushed it higher amid expectations that the Bank of England will keep hiking interest rates to stem the stubbornly high inflation witnessed in the United Kingdom.
Jeremy Hunt stated: “The best way to get growth going again and ease the pressure on families is to bring inflation down as quickly as possible. Our plan will work, but we must stick to it. While an extra Bank Holiday had an impact on growth in May, high inflation remains a drag anchor on economic growth.”
However, the UK is far from addressing the rampant inflation after three-month Average Earnings, excluding bonuses in May, remained at 7.3% while investors were anticipating a decline to 7.1%.
The Bank of England finds itself in a tricky situation after the latest industrial production data saw a massive decline of 0.6%, beating analysts' expectations of a 0.4% decline. The country’s manufacturing sector continues to suffer as businesses avoid taking on new debt due to the high-interest rates.
Still, the Bank of England has no choice but to maintain its hawkish policies as it fights to slow down consumer price inflation (CPI) in the UK. The country had even considered implementing pay cuts for government employees, but this proposal will likely never see the light of day due to political considerations.
Meanwhile, the disappointing US Produce Price Index (PPI) data release in the American session also contributed to the pair’s rally. However, the upbeat US initial jobless claims data tapered the pair’s gains.
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The GBPUSD price chart.
The GBPUSD currency pair was trading up 103.2 pips (0.80%) as the Sterling pound rallied against the US dollar.
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