On Wednesday, new statistics revealed that the inflation rate was behaving more stubbornly than some economists had predicted.
Due to this, traders reduced their bets on an August rate decrease, which caused the pound to rise above $1.30 for the first time since July of last year.
The market’s expectations that the new Labour government will provide economic stability have also helped the pound.
The value of the pound is increased by higher UK rates since they can draw in more foreign investment. Due to increased demand, sterling’s value increases in relation to other currencies.
The currency markets bet that UK rates would stay higher for a longer period of time in response.
With the headline rate at the Bank of England’s target rate of 2%, UK inflation remained stable in June.
However, a few of the fundamental inflation indicators that bank rate-setters constantly monitor continue to be persistently high.
For instance, core inflation, which eliminates the impact of more volatile goods like energy costs, stayed at 3.5% in June, while inflation in the services sector stayed at 5.7%.
A number of central banks have already lowered interest rates, notably the US Federal Reserve and the Bank of England.
