August 21(Reuters) – Sterling gained against the dollar on Thursday after a survey showed that British businesses are having their best month in a year due to a rebound in the services sector, while investors also kept their focus on the Fed’s Jackson Hole symposium.
Sterling rose 0.2% against the dollar to $1.3483 and was marginally higher on the euro at 86.57 pence to the common currency.
The services data trails a hot inflation print from Wednesday, which had spurred only fleeting gains for sterling.
The currency’s rise didn’t prove sticky, as analysts pinned the upside surprise on services inflation largely due to higher airfares as opposed to indications of broad-based price pressures.
The inflation numbers are unlikely to have a major impact on the Bank of England’s policy trajectory as “the composition of the data was less bad than the headline number,” said Samy Chaar, chief economist at Lombard Odier.
Money markets are currently pricing in a less than 50% chance of rate cut by the BoE before the end of 2025 while a cut is only priced in by March 2026. The benchmark two-year gilt yield, meanwhile, rose 6 basis points to 3.97% on Thursday, reversing a drop the previous day.
Sterling stands out as a leading carry trade candidate among the currencies of the Group of 10, comparable to the high-yielding U.S. dollar, analysts at UBS said in a note.
Carry trades involve borrowing in currencies with low interest rates and then using those funds to buy currencies with better yields.
“We expected a temporary consolidation of the strong GBP/USD rally. This has now played out, and we see more upside from here with a year-end target of 1.39,” the UBS note said.
Sterling is up nearly 8% against the dollar over 2025.
The focus now turns to the Federal Reserve’s Jackson Hole symposium where Fed Chair Jerome Powell is slated to speak on Friday.
The event takes place in the shadow of renewed investor concerns over U.S. President Donald Trump’s attempts to gain influence over the central bank.
Trump called on Federal Reserve Governor Lisa Cook to resign on Wednesday on the basis of allegations made by one of his political allies concerning mortgages she holds in Michigan and Georgia.
Against a basket of peers, the dollar was little changed at 98.2.
(Reporting by Jaspreet Kalra; Editing by Joe Bavier)
