The British Pound Gave A Sterling Performance Last Quarter

The British Pound Gave A Sterling Performance Last Quarter
Daniel Johnston

5 months ago2 mins

What’s going on here?

The pound sterling took a bow after wrapping up a show-stealing second quarter.

What does this mean?

The UK rarely gets to step into the limelight these days, but last quarter its currency got a full-on standing ovation. See, the pound sterling was the top dog among the Group of Ten nations, rising around 3% against the US dollar and marking its longest quarterly winning streak since 2021.

Pound vs yen

So, why the surge? Well, higher interest rates make a currency more attractive to savers and investors – and the Bank of England’s war on inflation has involved a full-blown rate-hiking crusade. Plus, markets are betting that there’s even more where that came from: they see rates hitting 6.3% by February, their highest level since 1998.

UK interest rates

Why should I care?

The bigger picture: Party’s over.

The pound might be beating its peers, but it’s anyone’s guess how long it can keep up the pace. Plus, some analysts are actually scratching their heads and wondering why it hasn’t rallied even further. The main suspect: fears that British growth could wind up hitting the brakes. That might be why last month’s surprise hike triggered more of a shrug than a cheer for the pound – and since then, the currency’s shown some other signs of fatigue too, falling from the giddy heights it hit in June.

For markets: Index in trouble.

While a strong pound might be good news for British holidaymakers, it’s not so rosy for the UK’s main stock market index, the FTSE 100. After all, the index’s companies earn about 75% of their revenue overseas, which shrinks when converted back into a stronger pound. Throw in weak oil prices hitting its sizable oil contingent, a glut of interest-rate-sensitive stocks, and the lack of big tech groups to ride the AI wave, and you start to see why the FTSE 100 has been left out of this year’s global stock market bonanza.



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