The British pound maintained its stance against the US dollar on Wednesday, as investors showed confidence in a tenuous peace between Israel and Iran. This marks sterling’s largest three-day rise since April, with a noted increase of 1.3% against the dollar this week alone.
Despite exchange rate stability, the UK’s economic picture suggests underlying difficulties. Surveys reveal a slowing labor market, particularly in graduate roles, with pay growth trailing inflation. Rate cuts by the Bank of England seem imminent, but monetary policymakers internally disagree on whether this is prudent given current inflation patterns.
Political challenges intensify as Prime Minister Keir Starmer faces resistance within his Labour party concerning welfare reforms, which may necessitate tax hikes or borrowing increases. These could influence sterling negatively if unresolved by autumn, hinting at rising financial uncertainties.
(With inputs from agencies.)
