British Pound: Resilient growth supports more BoE hikes - Commerzbank

FXStreet Insights Team FXStreet

Volkmar Baur at Commerzbank highlights the UK economy’s resilient growth, with upward revisions to GDP and solid monthly data. With inflation still sticky and core inflation at 2.6%, he now expects the Bank of England to hike rates in November and again in February to 4.25%. As a result, EUR/GBP is seen trading broadly sideways in coming months before Sterling weakens later in 2027.

BoE hikes and Sterling path

"The UK economy has remained relatively resilient so far this year. Following growth of 0.6% q/q in the first quarter, second-quarter GDP was revised up to 0.5% in the final release. Monthly GDP data for July, showing a 0.4% m/m increase, also point to a solid start to the third quarter."

"The improved growth outlook should make it easier for the Bank of England to raise rates further in order to lean against inflation. Until now, we had not expected the BoE to hike rates again. Recent developments, however, have led us to conclude that a November rate hike is now more likely than not. Moreover, we do not expect it to be a one-off move. We therefore anticipate another hike in February, taking Bank Rate to 4.25%."

"The market is also pricing in two additional rate hikes by February, meaning our revised call should have little immediate market impact. However, we had previously expected sterling to weaken towards year-end. We now expect EUR/GBP to trade broadly sideways over the coming months."

"It is only from the second quarter of next year that we expect sterling to come under renewed pressure against the euro. The market currently prices in two further rate hikes beyond the two moves we expect, implying four hikes in total. Following the February meeting, we expect those additional tightening expectations to be gradually priced out, putting sterling under renewed pressure."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

AUD/USD bulls regain control above 0.6950 amid USD retreat

AUD/USD regains traction and extends the previous day's bounce from the weekly low, aiming for 0.7000 in Asia on Friday. The overnight pullback in US bond yields keeps the US Dollar below an 18-month high, which in turn offers some support to the pair. Meanwhile, hawkish RBA expectations also keep the major underpinned.

USD/JPY holds gains near 158.00 after Japan's weak Household Spending data

USD/JPY clings to gains around 158.00 after data showed on Friday that Japan's Household Spending fell for the ninth straight month, undermining the Japanese Yen. Meanwhile, the US Dollar remains depressed as the overnight fall in US bond yields counters a hawkish Fed and geopolitical uncertainties, could cap any downside in the pair.

Gold retakes $4,200 amid pre-US CPI repositioning

Gold holds firm, revisiting $4,200 on Friday, extending recovery from two-month lows. US Dollar eases in tandem with Oil prices and Treasury yields, awaiting US sentiment data. The tide seems to be turning in favor of Gold, but the daily RSI is still bearish.

Starknet rally tests key breakout amid proposed Layer-1 transition

Starknet (STRK) is up 16% so far on Friday, advancing its steady recovery of nearly 200% since mid-August. The rally aligns with the rising demand for financial anonymity in the cryptocurrency market and the CEO of StarkWare, Eli Ben-Sasson’s proposed transition of Starknet to Layer-1 to achieve quantum security by 2027.

The inflation illusion: How government formulas shape the data

Every month, the government releases a barrage of economic statistics. Employment, inflation, consumer spending, economic growth, and countless other measurements are presented as objective facts that policymakers, investors, and the public can use to understand the economy. But what happens when the methodology used to produce those numbers changes?

The UK 30-year gilt just hit a 1998 high. Is that good or bad for the British Pound?

The yield on the UK's 30-year government bond, or gilt, went through 6% on October 1 for the first time since early 1998, and on Monday the Pound was at its strongest against the Euro since June 2025. The gilt market's 28-year high is mostly someone else's. Since early May, the 30-year gilt yield has risen about 0.15 of a percentage point and the US 30-year about 0.7.