Sterling Weakens to Near Three-Month Low
Sterling edged lower towards $1.32, near a three-month low, as investors favored the US dollar amid rising expectations of a Fed rate hike as soon as October, while the Bank of England is not expected to move until November. Elevated oil prices, amid stalled talks to reopen the Strait of Hormuz, have reinforced expectations of further Fed tightening and boosted safe-haven demand for the dollar. In the UK, markets price an over 80% probability of a 25bp hike in November, with around four increases priced in by mid-2027. However, subdued UK GDP growth through 2026 and early 2027 could constrain the BoE’s scope for aggressive tightening. Deputy Governor Dave Ramsden said he would support higher rates if inflationary pressures persist, echoing recent warnings from Governor Andrew Bailey. The MPC voted 6-3 to hold rates at 3.75% earlier this month, while warning inflation could peak around 4%.
32, near a three-month low, as investors favored the US dollar amid rising expectations of a Fed rate hike as soon as October, while the Bank of England is not expected to move until November. Elevated oil prices, amid stalled talks to reopen the Strait of Hormuz, have reinforced expectations of further Fed tightening and boosted safe-haven demand for the dollar. In the UK, markets price an over 80% probability of a 25bp hike in November, with around four increases priced in by mid-2027. However, subdued UK GDP growth through 2026 and early 2027 could constrain the BoE’s scope for aggressive tightening.
Deputy Governor Dave Ramsden said he would support higher rates if inflationary pressures persist, echoing recent warnings from Governor Andrew Bailey. 75% earlier this month, while warning inflation could peak around 4%.