FX.co ★ Pound Eyes Recovery Above $1.32

The British pound traded just above $1.32, attempting to recover from a sharp recent decline that pushed sterling to its weakest level in three months. Investors are closely watching ongoing tensions in the Middle East and their potential implications for the Bank of England’s policy stance ahead of this week’s decision. Israeli officials have warned that the war could continue for “several more long weeks,” while US President Donald Trump has stated that Iran is “not ready” to reach a deal. The surge in energy prices has led traders to reassess their interest-rate expectations, with markets now pricing in roughly 23 basis points of tightening for December—just under a standard quarter-point hike. This represents a marked shift from early March, when investors were anticipating two rate cuts from the BOE this year. For the March meeting, attention will center on the vote split, with a 7–2 or 6–3 decision to keep rates unchanged seen as the most likely outcome.