British Pound: Data mix limits sustained gains against US Dollar – BBH

Brown Brothers Harriman says the British Pound should find support from improving UK disinflation and a solid Q2 GDP print, which improves the growth-inflation mix and helps GBP against both the US Dollar and the Euro. However, the bank does not expect a sustained rally because the UK still has ample spare capacity, allowing markets to scale back Bank of England rate-hike expectations. Upcoming labor market, CPI, and retail sales data are likely to align closely with BoE forecasts, limiting upside surprises. The overall market implication is mildly supportive for GBP in the near term, but the macro backdrop argues for only limited and potentially short-lived gains versus USD and EUR.