Pound set for weekly rise after better than expected GDP data

LONDON, Aug 14 (Reuters) - Sterling was set for a weekly rise against both the dollar and the euro on Friday, helped by this week's better than expected GDP data as well as calm across currency markets that is pushing traders to buy currencies where bond yields are relatively high, like Britain.

The British currency was last at $1.3521, up 0.25% on the day and a similar amount on the week. It was trading at 85.44 pence per euro, a whisker firmer on the day and also around 0.25% stronger on the week.

"The pound has been supported by further evidence yesterday that the UK economy is proving more resilient than expected to the negative energy price shock triggered by the U.S.-Iran conflict," said Lee Hardman, senior currency analyst at MUFG.

Thursday's data showed the British economy grew by 0.3% during June, putting Britain on course for the strongest growth among the Group of Seven rich economies in the first half of 2026.

Hardman also said that "favourable carry conditions" had boosted the pound, something particularly relevant when compared to the euro.

In currency carry trades, investors borrow in a low yielding currency like the yen or the Swiss franc, and use those borrowed funds to buy a higher yielding currency, profiting from the interest rate differentials.

British short-dated borrowing costs are among the highest in developed markets, and are well above those in the euro zone.

Carry trades are particularly popular when volatility in currency markets is low, the current situation, and this is helping sterling appreciate on the European common currency.

The next important domestic data points for the pound are next week's inflation and labour market data.

(Reporting by Alun John; Editing by Susan Fenton)