Pound falls below $1.36 as BoE hike bets shift to 2027
The pound fell below $1.36, after Brent crude eased inflation concerns and markets pushed the next Bank of England rate-hike outlook into 2027. Around 24 bps is priced by December and 36 bps by February 2027.
The British pound fell below $1.36, retreating from six-month highs reached last week, as declining Brent crude prices eased inflation concerns and led markets to push expectations for the next Bank of England rate hike into 2027 from late 2026. data showed around 24 bps of tightening priced in by December and 36 bps by February 2027.
Less than 4 bps is priced in for the BoE's September meeting, implying roughly a 15% chance of a hike.
Most economists expect rates to remain at 3.75% this year, despite markets previously pricing a hike amid concerns over a potential escalation in the US-Iran conflict.
UK inflation rose to 2.9% in July, driven by higher household energy bills, and is expected to climb further toward year-end, while the labor market remained subdued.
Investors now await Fed Chair Kevin Warsh's Jackson Hole speech on Friday for further clues on the US rate outlook.