Britain’s economy delivered good news on Friday, especially for GBP/EUR. GDP grew by 0.4% in July, comfortably beating forecasts for no growth and extending June’s expansion. The UK also recorded the fastest growth in the G7 over the first half of the year. That helped the pound gain slightly on the euro at the end of the week, although it has been stable against both the euro and US dollar for the past month.

The rise in GDP gives the government something to celebrate ahead of a difficult Autumn Budget. For the Bank of England (BoE), things are less straightforward. A stronger economy makes higher interest rates easier to tolerate just as inflation is threatening to become troublesome again, a problem exacerbated by the oil price rising sharply again.

We will learn more this week. UK unemployment and earnings figures arrive tomorrow before Wednesday’s inflation report, with July’s annual rate having already climbed to 2.9%.

The Bank of England then announces its latest interest rate decision on Thursday. Holding rates remains the more likely outcome, but the chances of an increase have grown. Markets now see a meaningful possibility that policymakers could act this week, with tomorrow’s jobs figures and Wednesday’s inflation report still capable of shifting expectations.

Three policymakers already voted to raise rates at July’s meeting. Since then, the economy has performed better than expected and energy costs have climbed again. Oil prices jumped further this morning following fresh disruption in the Middle East, adding another complication to an inflation picture that was already becoming uncomfortable.

It all makes for an unusually important few days for sterling. The Federal Reserve also decides on interest rates on Wednesday, so the pound will have plenty of competition for investors’ attention. First up, however, comes tomorrow’s unemployment report before inflation and the Bank of England take over later in the week.