Sterling Falls as Safe-Haven Dollar Demand Rises
Sterling fell to $1.34 after briefly breaking above $1.35 earlier this week, its highest level since mid-September, as a global tech selloff triggered renewed demand for the safe-haven US dollar. Sentiment toward AI stocks deteriorated amid concerns that a Democratic sweep in the US midterm elections could usher in tighter regulation and curb the industry’s rapid expansion. Meanwhile, markets continued to digest the implications of the Bank of England’s policy decision on Thursday. The BoE raised interest rates for the first time in more than three years, with Governor Andrew Bailey indicating that further increases may be required unless the war in Iran comes to an end. In response, investors have ramped up expectations for further monetary tightening, with three additional rate hikes now fully priced in by November 2027. The central bank also warned that inflation could peak at 4.9% in Q2 2027, while its adverse scenario envisages a sharper rise to 6.2% in Q3.
Sterling fell to $1.34 after briefly breaking above $1.35 earlier this week, its highest level since mid-September, as a global tech selloff triggered renewed demand for the safe-haven US dollar. Sentiment toward AI stocks deteriorated amid concerns that a Democratic sweep in the US midterm elections could usher in tighter regulation and curb the industry’s rapid expansion. Meanwhile, markets continued to digest the implications of the Bank of England’s policy decision on Thursday. The BoE raised interest rates for the first time in more than three years, with Governor Andrew Bailey indicating that further increases may be required unless the war in Iran comes to an end.
In response, investors have ramped up expectations for further monetary tightening, with three additional rate hikes now fully priced in by November 2027. The central bank also warned that inflation could peak at 4.9% in Q2 2027, while its adverse scenario envisages a sharper rise to 6.2% in Q3.