Pound weakens to about $1.35 as BoE hike bets rise
The pound weakened to around $1.35 as the dollar strengthened. Expectations for further Bank of England rate hikes rose amid inflation concerns, with Brent above $100 and UK natural gas at its highest since late 2022.
35 as the dollar firmed, even as markets lifted expectations for further Bank of England rate increases amid rising inflation concerns. Higher energy prices, the ECB’s rate increase and a more hawkish inflation outlook also weighed on UK yields. Brent crude rose above $100 a barrel, while UK natural gas prices hit their highest level since late 2022 as escalating Middle East tensions raised concern over energy supplies. Markets are fully pricing four BoE rate increases by the end of 2027, but Governor Andrew Bailey said another hike is not inevitable and that future decisions will depend on evolving economic and geopolitical developments.
The dollar also gained after stronger-than-expected US PPI data pushed the implied probability of a Fed rate hike next week to above 70%.