On Friday, the British pound ended the month of July with yet another weakness, after the US dollar once more got a lift because of the inflation data.

Pound declines

There was almost a 1% drop in the Sterling during afternoon trading, as it was moving mainly because of a rally in the US dollar after the important inflation data.

However, the British currency did manage to trim some of its losses by the end of the day and ended the month down by 0.1%.

Market analysts said that the US dollar had gotten some strength in reaction to the stronger core PCE data that had been released on Friday.

In fact, many analysts considered the dollar’s strength as an overreaction. By 1509 GMT, the pound was almost flat against the greenback, after having declined by 0.9% earlier, to trade at $1.2163.

On Friday afternoon, there was a rally in the US dollar after the data showed that consumer spending in the US had increased more in June than had been expected.

Sterling’s performance

Throughout the year, sterling has been struggling against the US dollar, as the latter has been strengthening because of its value as a safe-haven asset.

The British pound only managed to record gains against the greenback in one month, as it had increased marginally back in May.

As far as losses are concerned, the pound has lost more than 10.1% against the US dollar since the beginning of the year.

This has been because of the slowing economy in Britain, domestic political turmoil, and the rising interest rates.

Market analysts said that the pound had been underperforming for most of the year and they did not expect this trend to change anytime soon.

Economic data

On Friday, the Bank of England released data, which showed that last month had seen the sharpest rise in consumer lending since May 2019.

Meanwhile, the mortgage approvals in Britain had declined to their lowest value, which had not been seen since June 2020.

This is the latest indication that the cost of living crisis in Britain is intensifying and it comes just a little ahead of the monetary policy meeting of the central bank next week.

The meeting is a crucial one because policymakers will have to decide the magnitude of the interest rate hike, whether to stick to their 25 basis points rise or to hike it up by 50 basis points.

On Friday, the British currency managed to stabilize against the euro, after it had managed to rise to a high of three months against the common currency a day earlier.

Sterling recorded a 0.4% drop against the euro, which saw it trade at about 84.055 pence. According to analysts, the drop was not because of the pound.

Instead, they said that the decline had primarily been because of the euro leg, along with global risk sentiment because the British currency is more sensitive to it than the euro.

They expect this to continue, at least until August 4th when the Bank of England meets.

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