British Pound: Energy-driven inflation risks support GBP against US Dollar – MUFG
MUFG highlights that rising European natural gas prices are reviving inflation risks, which could push the Bank of England toward another rate hike and underpin the Pound.
The British Pound is gaining strength against the US Dollar due to concerns over rising European energy prices, according to MUFG. The divergence in energy dynamics between Europe and the UK may support both the Euro and Pound against their peers. While crude oil prices remain stable, UK natural gas futures have surged, with a 62.5% increase since the start of July.
The Bank of England (BoE) may consider another rate hike to tackle the worsening energy-related inflation risks, making it more difficult to ignore despite weaker domestic economic conditions. The BoE appears more patient than the European Central Bank (ECB), and the natural gas price moves in Europe will fuel divergence, providing support for the euro and pound.
GBP/USD is currently consolidating in European trading ahead of the US Nonfarm Payrolls benchmark revision and Fed Chair's debut at the Jackson Hole Symposium, which could increase market volatility. Meanwhile, EUR/USD is holding steady around 1.1650, with the US Dollar benefiting from hawkish expectations from the ECB. Gold has continued its upward trend, trading near $4,610.
Hyperliquid, a Nasdaq-listed company, has seen a 2% drop after reaching a record high, while the XAU/USD pair maintains a bullish bias.
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