After the pound hits a 14-week high, the rally is in doubt; inflation exceeds expectations but the probability of central bank rate hikes remains low

智通财经2026/08/19 13:41

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The British pound rose about 0.6% against the US dollar on Wednesday to $1.3621, reaching a 14-week high, mainly driven by a general weakening of the US dollar. However, strategists remain cautious about whether the pound can continue to climb above current levels.
UK inflation for July rose to 2.9%, in line with market expectations, while core inflation remained at 2.6%, slightly above the expected 2.5%. This marginal upside surprise is not sufficient to force the Bank of England to implement a rate hike at its September meeting, and a wait-and-see policy stance is likely to persist in the short term.
Regarding GBP/EUR, after hitting a one-week low of 0.8562, the exchange rate stabilized around 0.8552. Ongoing uncertainty over fiscal policy ahead of the autumn budget continues to put pressure on the pound, and combined with the Bank of England's steady policy path, the pound lacks fundamental support for a sustained rise.
Overall, the current strength in GBP is more due to the passive boost from the weaker US dollar rather than its own positive drivers. Unless the Bank of England sends a clear signal of policy shift, the upside potential for the exchange rate may be limited. The market is focusing on upcoming inflation data and increased clarity in fiscal policy.

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