Sterling rose against the dollar on Monday as the greenback weakened following a rally on Friday due to a strong U.S. jobs report. Investors are now focusing on the UK’s spending plan set to be announced later this week.
Sterling’s Rise and Economic Context
The pound increased by approximately 0.4% to $1.3575 and remained stable against the euro, which slightly decreased to 84.21 pence. The UK economy has shown resilience amid global challenges, supported by positive business surveys and robust first-quarter GDP figures.
Upcoming Spending Review
Investors are keenly awaiting the spending review scheduled for Wednesday, which will outline government department budgets until 2029. This review is crucial as concerns about the UK’s sovereign debt levels persist.
Expert Opinions on Economic Vulnerability
Kit Juckes, chief FX strategist at Societe Generale, noted that the UK economy remains vulnerable due to limited fiscal policy options and lack of economic momentum. However, average wage increases have provided some support, with consumer activity in shops and bars showing signs of life.
Bank of England’s Interest Rate Decision
Market data suggests that the Bank of England is expected to keep interest rates unchanged on June 19. Sterling’s gains this year have largely been driven by a weaker dollar, influenced by concerns over potential U.S. recession risks under President Donald Trump’s policies.
As the pound has appreciated about 8% against the dollar this year, the upcoming spending plan will be crucial in determining its future trajectory.
