The British pound climbed above $1.30 against the US dollar yesterday, marking its highest level in more than a year and providing a boost for British holidaymakers.
This rise has been fueled by positive signs in the UK economy, while the US dollar has come under pressure amid concerns about a potential economic slowdown in the United States.
Sterling reached $1.3052 yesterday, its strongest level since July of the previous year. However, it remained steady against the euro, hovering just above €1.17.
The pound's gains against the dollar are largely attributed to growing concerns over the US economy. These concerns have led to speculation that the Federal Reserve, the US central bank, might be compelled to cut interest rates by as much as half a percentage point next month.
This speculation has been driven by weaker-than-expected job figures in the US. There is now talk among traders that revisions to US employment data could reveal that up to 1 million fewer jobs were created in the year leading up to March 2024 than initially reported. This has heightened fears that the US economy may struggle to achieve a "soft landing," where inflation decreases without triggering a recession.
All eyes are now on Federal Reserve Chairman Jerome Powell's upcoming remarks at the Jackson Hole meeting of central bankers in Wyoming, scheduled for Friday. Bank of England Governor Andrew Bailey is also expected to speak at the event, addressing an economic landscape in the UK where inflation is nearing 2% and unemployment is on the decline.
