LONDON: The pound rose slightly on Friday after data showed UK growth beat expectations in July, continuing a string of relatively upbeat readings for the British economy.
British gross domestic product grew 0.4 percent in July, figures from the Office for National Statistics showed, far outstripping economists’ forecasts that the economy would flatline.
Sterling rose 0.1 percent to USD1.352 and climbed a similar amount against the euro. The euro zone’s currency was down 0.1 percent against the pound to 85.84 pence.
Growth was driven by the services sector, which expanded 0.4 percent month-on-month, the figures showed.
Britain’s economy expanded 1 percent in the first half of the year, the fastest growth in the G7, although some economists think issues with seasonal adjustments could mean the figure is overstated. That means it could beat the Bank of England’s forecast of 1.1 percent growth in 2026, although some analysts think the data could be revised lower.
Investment in AI is helping drive growth in sectors such as telecoms and information services, said Sanjay Raja, chief UK economist at Deutsche Bank. “The UK growth story is becoming harder to ignore,” he said. “Households and businesses are still spending – despite the unfolding energy shock impacting disposable incomes.”
Britain’s economy has fared better than expected in the face of rising energy costs due to the Iran war, but the threat to growth still lingers, with Brent crude oil prices rising to USD110 a barrel for the first time since May.
The rise in energy costs has driven traders to ramp up their bets on interest rate hikes and helped send bond yields to multi-year or even multi-decade highs around the world.
Britain’s benchmark 10-year yield rose to its highest since 2007 on Thursday near 5.4 percent while the 30-year yield reached levels not seen since 1998 at almost 6 percent. Yields rise as prices fall and vice versa.