Investing.com — Sterling traded higher on Thursday while the euro also gained, as the dollar retreated on concerns over debt at AI-sector companies, with stronger-than-expected UK growth data adding support to the pound.
Sterling jumped 0.51% against the dollar to 1.3259, while the euro gained 0.56% to 1.1216, at 05:00 ET (09:00 GMT).
The ONS said GDP rose 0.1% in August against a consensus for a 0.1% fall, with annual growth at 2.1%, the strongest since October 2022. Manufacturing jumped 1.2% on the month.
Paul Dales, chief UK economist at Capital Economics, said the data “continued the remarkable resilience of the economy to higher energy prices and borrowing costs,” though he still expects higher inflation to dampen growth.
Samuel Fuller, director at Financial Markets Online, said the figures leave the Bank of England with “a free hand to focus solely on getting down inflation.” He said the bank is “now widely expected to increase its base rate to 4%” in three weeks
The dollar index hit a new 2026 high on Wednesday before reversing sharply in Asia. The rally followed a hot September U.S. inflation report, but within hours short-dated Treasury yields and the dollar “had more than reversed their gains,” said Chris Turner, global head of markets at ING.
Turner said the driver “seemed to be growing concerns over the debt load in the AI sector,” citing a sell-off in CoreWeave’s debt, with its 2032 bonds at 78 cents on the dollar. “Rather than rallying as a safe haven, the dollar weakens as the Fed cycle gets repriced dovishly,” he said.
The CPI data raised questions over whether the Federal Reserve would have to deliver a back-to-back hike in October, ING said.
Thursday’s retail sales and producer price data are the next catalysts. “A decent September retail sales figure and firm PPI data will keep the market guessing how quickly the Fed tightens again,” Turner said, calling the inputs “mildly dollar supportive.” The source material cited no Fed speakers.
EUR/USD touched ING’s 1.1100/1120 target area before quickly reversing. Turner said an AI correction was “probably the biggest chance of EUR/USD finding support right now,” given that “the French budget story looks set to endure.” The source material cited no ECB commentary.
