FX.co ★ Sterling Climbs to Over 3-Month High

The British pound climbed to around $1.355, its highest level in more than three months, as investors positioned themselves ahead of a busy week of UK economic releases. Markets will first focus on labour market data due on Tuesday, followed by Wednesday’s inflation report. Headline inflation is expected to pick up to a four-month high, though core inflation may ease. Investors are currently fully pricing in a 25-basis-point Bank of England rate hike in December, with any further tightening contingent on the inflation outlook. The BoE kept interest rates unchanged in July, and Governor Andrew Bailey reiterated that the disinflation process remains on track despite ongoing external risks. Still, the protracted conflict in the Middle East could keep energy prices elevated and reinforce inflationary pressures. At the same time, expectations for a Federal Reserve rate increase in September continue to fade.