The British pound steadied around $1.35, halting its recent decline and trading near a two-week low, as a sharp rally in the yen weighed on the US dollar and softer oil prices offered some support. The yen strengthened on rising expectations of a Bank of Japan rate hike and the potential for official intervention, triggering broad-based dollar weakness.
At the same time, Brent crude pulled back from six-week highs after US President Donald Trump indicated that the renewed US military campaign in Iran would not be prolonged.
Even so, sterling remains under pressure amid persistent concerns over energy-driven inflation, higher interest rates, and the UK’s fiscal outlook, despite Prime Minister Andy Burnham’s attempts to reassure investors of the government’s commitment to fiscal discipline. Markets are now fully pricing in a Bank of England rate hike by year-end, with a further increase anticipated by March 2027.
