Sterling held steady just above the $1.35 level, with renewed inflation concerns reinforcing expectations of further Bank of England interest rate increases. Brent crude moved closer to $100 a barrel, while UK natural gas prices rose to their highest level since late 2022. The moves came amid renewed fighting between the US and Iran and reports that Iran and Oman were nearing an agreement to manage shipping through the Strait of Hormuz.
According to LSEG data, markets have fully priced in a 25-basis-point BoE rate hike by December, with a second increase expected by March 2027. Investors are also weighing the government’s commitment to fiscal discipline and its efforts to restore the UK’s standing in international bond markets ahead of the October 28 budget. That assessment includes scrutiny of plans to spur regional growth by using public institutions to help attract private investment.
In the US, investors are awaiting key inflation figures later this week, following a stronger-than-expected jobs report on Friday that pushed the implied probability of a Federal Reserve rate hike next week to nearly 60%.
