Pound Gains on Rate Hike Bets
The pound climbed above $1.34, reaching its highest level since mid-September and gaining around 1% this month. This marks its first monthly advance since August, supported by the government’s budget and growing expectations of a Bank of England rate hike in November. Chancellor John Healey delivered his first budget on Wednesday, with spending plans largely meeting expectations and offering few surprises for markets. He said the government would use part of its fiscal headroom, now reduced to £15 billion from £24 billion, to meet its main fiscal target while continuing efforts to restore public finances amid the economic fallout from the Iran conflict. Money markets are almost fully pricing in a BoE rate hike on November 5, followed by further increases in February and July, with a 50% chance of another by December 2027, as persistent inflation above target, rising bond yields and stronger-than-expected economic data have reinforced expectations of tighter policy.
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The pound climbed above $1.34, reaching its highest level since mid-September and gaining around 1% this month. This marks its first monthly advance since August, supported by the government’s budget and growing expectations of a Bank of England rate hike in November. Chancellor John Healey delivered his first budget on Wednesday, with spending plans largely meeting expectations and offering few surprises for markets. He said the government would use part of its fiscal headroom, now reduced to £15 billion from £24 billion, to meet its main fiscal target while continuing efforts to restore public finances amid the economic fallout from the Iran conflict.
Money markets are almost fully pricing in a BoE rate hike on November 5, followed by further increases in February and July, with a 50% chance of another by December 2027, as persistent inflation above target, rising bond yields and stronger-than-expected economic data have reinforced expectations of tighter policy.