BoE Rate Hikes Prop Up Pound Despite Stagnant UK Economy

On June 5, the British pound's recent strength is shown to rest primarily on Bank of England rate hikes rather than economic fundamentals. This follows the June 3 House of Lords warning that proposed stablecoin caps and unremunerated deposit rules could undermine GBP-token competitiveness and push activity offshore. With rates at decade highs, inflation above target, and GDP, retail sales and housing data weakening, markets already price a potential cut next year. Further deterioration risks a sharp sterling correction and elevated GBPUSD volatility.