FX.co ★ Sterling Strengthens to 3-Week High

The British pound rose to about $1.333 on Friday, its highest level since September 22, after stronger-than-expected UK economic data reinforced expectations of a possible Bank of England rate hike next month. GDP grew 0.1% in August following a 0.4% expansion in July, defying forecasts of a contraction, while output increased 0.7% in the three months to August. The economy’s resilience has bolstered the case for tighter monetary policy, with markets still largely pricing in a 25-basis-point increase on November 5, though those expectations have eased slightly. Governor Andrew Bailey noted there was limited evidence that higher energy costs were feeding through into wages and broader prices, but cautioned that it was too early to judge the full impact. Other policymakers have called for earlier action to address inflation risks. Investors are also closely watching Chancellor John Healey’s upcoming budget, which is expected to relieve pressure on households while preserving plans to reduce the fiscal deficit.