Sterling Extends Gains as Investor Sentiment Shifts

The British pound has notched a third consecutive weekly climb against the dollar, defying broader economic instability. This steady ascent follows a period of localized market calm, as stable oil prices and a temporary lull in geopolitical tensions between the United States and Iran encouraged fresh capital flows into sterling.

Positive sentiment stems largely from a Bank of England survey revealing that domestic businesses now expect a moderation in price hikes over the coming year. This outlook has provided a rare cushion for the currency, helping it reach $1.346 on Friday, a 0.3% daily increase that contributes to a modest 0.1% gain for the week.

Despite this momentum, the underlying economic landscape remains fragile. Analysts at ING anticipate that the Bank of England will hold interest rates steady this month, pushing any potential hike to September at the earliest. With UK growth showing clear signs of deceleration and inflationary pressures remaining a persistent hurdle, the pound faces a difficult balancing act between investor optimism and the reality of a cooling economy.