FX.co ★ Pound Rebounds as Middle East Tensions Ease

The British pound climbed back toward $1.34, rebounding from three-week lows, after Iran and Israel agreed to de-escalate strikes following a call from US President Donald Trump. The earlier flare-up had driven crude prices higher on Monday amid fears that the ceasefire might not hold. Rising energy costs stemming from the tensions have intensified inflation concerns, leading investors to price in at least a 25-basis-point Bank of England rate hike in September, with a strong likelihood of a second increase. However, dovish Monetary Policy Committee member Alan Taylor, who supported the 8–1 vote to keep rates on hold in April, said on Monday that current interest rates are “quite restrictive” and that no further tightening is needed to bring inflation under control.