Inflation in the UK rose in July, and a key point to keep in mind is that the acceleration is purely energy-driven. The UK's GDP for the second quarter grew by 0.4%, with no threats of recession, and the main risk to the British economy in the coming months is the energy crisis. British gas prices at NBP Day-Ahead hit 1.6615 pounds per therm at the end of August, the highest level in over three years. The winter 2026 contract rose by 4.8% over the week.

Critically low storage levels exacerbate the situation. British gas storage was only 39% full as of August 21 — the lowest figure in Europe. By August 26, this figure had increased to 46%, but it remains significantly below those of European neighbors.

The problem is that the UK is a net energy importer. With the ongoing conflict in the Persian Gulf and shipping restrictions, gas and oil prices will remain high, putting pressure on inflation and real household incomes. Analysts note that even after negotiations over the Strait of Hormuz resumed, prices quickly rebounded, reflecting ongoing geopolitical uncertainty.

After Federal Reserve Chair Warsh's speech at Jackson Hole, markets raised expectations for a Fed rate hike this year to more than 70%. Forecasts for the Bank of England's rate remain unchanged, with consensus expecting the rate to stay at 3.75% until 2027. The BoE's long-term pause works against the pound amid rising forecasts for the Fed's rate. Still, it's quite possible that Warsh did not necessarily imply that the rate would be raised, merely conducting verbal intervention for another purpose. The probability of such a scenario still needs to be assessed; for now, the market has responded only with a strengthening dollar, without a change in the interest rate spread.

The net short position on GBP decreased by 0.73 billion pounds to -3.88 billion pounds during the reporting week; the dynamics remain weak, but the calculated price is moving upward with confidence.

Last week, we noted that the pound had no other growth driver except for dollar weakness and expected GBP/USD to continue rising. Warsh has thrown a spanner in the works, but we still assume that the pound will reclaim the initiative, with support at 1.3440/60, where the pair will meet the trendline. We expect market participants to seek buying opportunities as they approach this level, with the pound potentially reversing towards the summer high of 1.3674.