Sterling weakened to $1.336, hovering near its lowest level since late July, as investors weighed escalating tensions in the Middle East alongside weaker-than-expected UK public finance figures. The US dollar remained firm, supported by expectations of further interest rate increases from the Federal Reserve.
Brent crude extended its recent decline following reports that Iran had proposed reopening the Strait of Hormuz within seven days, contingent on Washington meeting a series of demands, including lifting the military blockade of Iranian ports.
In the UK, official data showed the budget deficit widened to £18.3 billion in August, exceeding the £15.5 billion forecast. The deterioration partly reflected higher inflation-linked spending on pensions and welfare benefits. Attention now shifts to next month’s Autumn Budget, amid reports that the government is considering changes to its fiscal rules that would allow borrowing for infrastructure projects to be excluded from the main borrowing targets.
