LONDON, July 10 (Reuters) - The pound rose on Friday to an
almost one-month high against the dollar and a one-year peak
versus the euro as markets mulled central banks' likely response
to the latest rise in energy prices stemming from the
U.S.-Israeli war with Iran.
Sterling rose to $1.345 on Friday, the highest
since June 15, and was last up 0.1%.
Meanwhile the euro fell to 85.18 pence, the
lowest against the pound since late June 2025, before paring its
losses to trade flat.
Analysts have debated the reasons for the strength in
sterling in recent weeks with better-than-expected growth,
foreign companies purchasing UK firms, a calming of political
instability, and Bank of England policy all cited.
Monex Europe senior FX strategist Barry van der Laan said
comments late on Thursday from Bank of England chief economist
Huw Pill that interest rates will have to rise were likely
supporting the pound on Friday.
"That message reinforced the market's view that the Bank of
England still has less room to look through inflation than the
Fed or the ECB," said Van der Laan.
Yet he added: "With no important UK data today, sterling is
likely to be driven by broader dollar moves, oil prices and
Middle East headlines."
The International Monetary Fund this week upgraded its UK
growth forecasts, predicting a 1% expansion in 2026. The outlook
for Britain, a major energy importer, has been improved by the
June U.S.-Iran deal and subsequent slide in oil prices.
The IMF said Britain would be the third-fastest growing
economy in the G7 this year behind Canada and the U.S,
outstripping the euro zone countries.
However, oil prices have risen around 5% this week as the
U.S. and Iran have traded strikes and the U.S. cancelled an
Iranian oil trading waiver.
Brent crude was last trading roughly flat at $76 a
barrel, although it remained well below April's high of $126.
Former Greater Manchester mayor Andy Burnham took a big step
to becoming the next prime minister on Thursday after he secured
the support of the vast majority of Labour members of parliament
to replace Keir Starmer.
Some analysts have said the clarity on the next leader and
Burnham's commitment to the fiscal rules has helped the pound
slightly, although they caution UK markets could become more
turbulent once he starts outlining economic policies.