Pound Recovers as AI Stock Fears Fade, Oil Prices Drop

The British pound saw an increase against the U.S. dollar on Monday, largely erasing losses from the previous Friday. This recovery was driven by diminishing concerns surrounding AI stocks, which had previously boosted the dollar, and a subsequent drop in oil prices. Consequently, demand for safe-haven assets like the dollar cooled.

Sterling maintained a steady position against the euro, remaining near a recent 20-month high. This strength follows the Bank of England's interest rate hike and indications of further tightening, contingent on de-escalation in the Middle East which has pressured oil prices lower.

Brent crude futures experienced a decline as U.S. President Trump downplayed the likelihood of renewed strikes on Iran, although supply concerns persist due to incidents near the Strait of Hormuz. Despite recent easing, oil prices remain elevated compared to pre-conflict levels.

This week's focus includes the release of UK third-quarter GDP data, which economists surveyed by Reuters expect to show 0.7% growth, an improvement from the prior period. Analysts note strong productivity and capital expenditure growth, supported by AI spending and industrial policy, have boosted economic activity. Consumer spending has also remained robust, and business confidence is steady, notwithstanding geopolitical uncertainties and the ongoing impact of energy costs on household incomes.