The pound rose after the UK economy posted better-than-expected growth in the second quarter of the year.
Sterling rose 0.1% against the dollar to $1.3583, the highest level seen in a month, and gained 0.2% versus the euro to €1.1618 as the stronger growth made interest rate cuts by the Bank of England less likely.
ICAEW economics director Suren Thiru said: “While these stronger than expected figures may not ease concerns among rate-setters over the health of the UK economy, a September interest rate cut remains implausible given mounting concerns over rising inflation.”
The economy grew 0.4% month-on-month in June, snapping a run of negative prints — May was -0.1% — and beating expectations for a more subdued recovery of 0.1%.
Read more: UK economic growth slows between April and June
British output rose by 0.3% in the second quarter of 2025, the Office for National Statistics (ONS) said. That was higher than the 0.1% expected by economists polled by Reuters.
The US dollar index (DX-Y.NYB), which measures the greenback against a basket of six currencies, was near multi-week lows at 97.79.
Gold extended gains to a third session on Thursday morning, supported by growing expectations that the US Federal Reserve may cut interest rates in September, following subdued inflation data that also weighed on the dollar.
At the time of writing, gold futures were muted at $3,409.40 per ounce, but spot gold inched up by 0.3% to $3,365.05 per ounce.
“Markets are pricing in the chance that the Fed cuts 50 basis points in September. So, the dollar is weakening, gold is going up as a result, yields are also down,” said Kyle Rodda, Capital.com's financial market analyst.
“The technical setup of gold looks really constructive. The trend still looks higher. We just basically need to see the market break through $3,400 level on a sustained basis.”
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Data released on Tuesday revealed that the US consumer price index (CPI) rose largely in line with expectations. Analysts noted that the full effects of tariff-driven price increases have yet to be reflected in the broader economy. The mild inflation data further strengthened the case for the Federal Reserve to lower its benchmark interest rate at its upcoming meeting. Markets now place a 95% probability on a rate cut in September.
Lower interest rates reduce the opportunity cost of holding non-yielding assets like gold, making the metal more appealing to investors.
