FX.co ★ Pound Strengthens as UK Awaits New PM

The pound rose to $1.343, its highest level since mid-June and its second consecutive weekly gain against the dollar. The advance was driven by expectations that the Bank of England will raise interest rates later this year, with money markets pricing in at least one hike and assigning a 25% probability to a second. Sterling has recovered more than 2% since touching a seven-month low in late June, after Labour Prime Minister Keir Starmer announced his resignation. Andy Burnham is set to succeed him as party leader when the leadership contest concludes on Friday, July 17, and is expected to be formally appointed prime minister on Monday, July 20. The pound’s strength has also coincided with Brent crude reaching two-week highs this week amid renewed US–Iran tensions, although peace talks are expected to continue. Because the UK is more dependent on energy imports than many of its peers, its financial markets remain especially sensitive to movements in oil prices.