FX.co ★ Pound Holds at Six-Month Highs

The British pound traded above $1.36 in the final full week of August, hovering near its strongest level since mid-February, as the US dollar came under pressure after the US Treasury unexpectedly announced plans to at least double its purchases of longer-dated government bonds. Investors also looked ahead to further clarity on Iran-related sanctions, while markets awaited Fed Chair Kevin Warsh’s remarks at Jackson Hole on Friday for guidance on the future path of interest rates.

In the UK, money markets continue to price in one Bank of England rate increase by year-end, with an additional quarter-point hike fully anticipated by early 2027. Recent data showed UK headline inflation quickening to 2.9% in July, the highest reading since March, while core inflation surprised to the upside at 2.6%. PMI surveys signaled a faster pace of business activity growth, and consumer confidence climbed to a two-year high in August, offering an early tailwind for new Prime Minister Andy Burnham. Even so, the UK remains exposed to elevated inflation risks stemming from the conflict involving Iran.