The FTSE 100 (^FTSE) and European stocks closed in positive territory on Friday amid a strengthening pound and growing bets for a September rate cut from the US Federal Reserve. Sterling hovered around a one-year high after stronger-than-expected GDP data on Thursday, which showed that the British economy expanded 0.4% in May.
It came along separate data which revealed US inflation came in lower than expected last month, falling to an annual rate of 3%, down from 3.3% in May. This has boosted hopes for a September interest rate cut, driving the dollar lower.
The pound hit a peak of $1.2947 against the US greenback on Thursday, the highest level since late July 2023. It is now approaching the $1.30 mark.
It has also been boosted by hawkish comments from the Bank of England’s chief economist this week. Huw Pill said recent economic data pointed towards some “upside risks to my assessment of inflation persistence”, suggesting that he is not yet convinced by the case for an August interest rate cut.
Elsewhere, producer prices in the US rose in June by 0.2% compared to the month before, after being unchanged in May, the Labour Department’s Bureau of Statistics said.
The annual rate picked up to 2.6% from 2.4%. As a result, the S&P 500 and the Nasdaq turned lower.
London’s benchmark index rose to close 0.4 higher at 8,256 points.
Germany's DAX (^GDAXI) rose 1.2% and the CAC (^FCHI) in Paris climbed to finished the 1.3% higher
The pan-European STOXX 600 (^STOXX) closes 1% higher
Wall Street mounted a comeback in New York after a Big Tech fall on Thursday
The pound hovered near its one-year high against the US dollar (GBPUSD=X) at 1.2989, up 0.6% on the day
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