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Pound gains against falling dollar as UK growth slows

·Reporter
·2-min read
pound  Sterling Macro photo with dramatic shadows.
The pound pushed as much as 0.8% higher on Monday. Photo: Getty

The pound (GBPUSD=X) jumped on Monday against a declining dollar despite the UK economy growing less-than-expected in July.

It rose as much as 0.8% to $1.1680 against the greenback in early trade. Against the euro it fell 0.5% to €1.14.

The UK economy bounced back more slowly than expected in July as the soaring cost of living continues to darken the outlook.

Gross domestic product (GDP) grew 0.2% in the month following a 0.6% slump in June, when activity was hit by the extra bank holiday to mark the Queen's Platinum Jubilee, according to the Office for National Statistics.

According to the Office for National Statistics (ONS), the services sector was the biggest driving force behind the expansion, jumping 0.4% as the women's England football team and the Commonwealth games lifted GDP.

Danni Hewson, financial analyst at AJ Bell, said: "Even in celebration there was an undertone of caution and July’s rather anaemic growth came in below expectations, a factor which will add to concerns that the UK is slow marching towards recession.

"Despite the package of support for households, which has just been announced by the government, the cost of living crisis hasn’t magically disappeared.

"Energy costs are just one part of the equation — food prices, fuel prices and pretty much every single service we use has gone up and, even if inflation doesn’t peak at those eyewatering levels we’d been warned of, budgets are still very tight."

Read more: UK economy grows slower than expected as higher prices hit growth

Sterling's rise also comes as the nation undergoes a period of national mourning for Queen Elizabeth II as her coffin is to lie in state in St Giles's Cathedral in Edinburgh.

Michael Hewson, chief market analyst at CMC Market, said: "The pound will be especially in focus this week, a week that will also have a profound effect on the national mood, as the UK undergoes a period of national mourning for Queen Elizabeth II, a sovereign who has been part of the fabric of UK society for over 70 years.

"Not only has she left a deep and indelible mark on our national life, but also on our identity over the course of her reign, while navigating a period of seismic change both in the UK, but globally as well."

Watch: What is a recession and how do we spot one?