Stocks in Europe and the FTSE 100 surged on Friday as the pound remained strong on expectations that interest rates may be slashed by the US. This came after upbeat UK GDP data were released, with the pound at its strongest in a year following these remarks by the Bank of England. The rise in American producer prices hit activity on Wall Street.

European Stocks and Pound Rise

On Friday, FTSE 100 closed on a high note together with other European stocks. It occurred after the strengthening of the pound and growing hopes that the US Federal Reserve could suggest reducing interest rates in September. The value of the pound surged to a one-year high following positive UK economic news, including the growth of the economy by 0.4% in May.

US Inflation and Dollar’s Decline

There was a specific guess that US inflation eased lower last month to 3% from 3.3% in May. Hope for an interest rate cut resurfaces in September, bearing down on the dollar’s value.

Pound Hits High Against Dollar

On Thursday, the pound rose to $1.2947 against the US dollar—the highest since July 2023—getting closer to $1.30. Moreover, it was mentioned by the chief economist of the Bank of England, Huw Pill, that there were upside risks to inflation from recent readings on the economy, indicating he was not yet convinced about cutting rates next month.

US Producer Prices Rise

Closer to home, in the US, producer prices moved up 0.2% in June from May, according to the Bureau of Statistics from the Labour Department. The annual rate climbed to 2.6% from 2.4%. The S&P 500 and Nasdaq then fell.

European Stock Market Gains

The London FTSE 100 index rose 0.4% to 8,256 points in afternoon trading. The DAX climbed 1.2% in Germany, while Paris’s CAC rose 1.3%. The pan-European STOXX 600 closed 1% higher.

Wall Street Bounces Back

On Wall Street, New York markets bounced back after a weak session on Thursday when technology giants sold off. The pound was at 1.2989 vs the U.S. dollar, not far from its one-year high and stronger by 0.6 percent on the day.

Heavy Week Ahead

Next week will feature several major economic indicators, including US retail sales, UK and Japan inflation data, and China’s Q2 GDP data. Politically, the events include the Republican National Convention in the US and the Third Plenum of China. Other events include a decision by the European Central Bank and a bank lending survey, plus an interview with Fed Chair Powell. Notable company earnings include those of TSMC, ASML, and BlackRock.

US Producer Prices in Detail

In more detail, the US Labour Department announced that producer prices rose 0.2% in June after not showing any change in May. The annual rate picked up from 2.4% to 2.6%, ending both the S&P 500 and Nasdaq on a decline.

Conclusion

Overall, financial markets were mixed, as European equities and the pound underpinned gains while Wall Street was at strain as producer prices logged a surprise increase. The week ahead appears set to be full of key economic data releases and other events that may continue to swing the market’s pendulum.