FX.co ★ Sterling Gains as Markets Price Further BoE Rate Hikes

Sterling edged up to $1.354 as renewed inflation concerns bolstered expectations of further Bank of England rate hikes. Brent crude briefly touched $100 a barrel, while UK natural gas prices rose to their highest levels since late 2022, as escalating tensions in the Middle East intensified worries over energy supplies. Markets are now fully pricing in a 25-basis-point BoE rate increase by December, followed by two additional hikes in 2027. However, policymakers are widely expected to keep rates on hold at the September 17 meeting. Addressing lawmakers in Parliament on Tuesday, BoE Governor Andrew Bailey pushed back against the notion that another rate rise is inevitable, emphasising that future decisions will hinge on evolving economic and geopolitical conditions. Meanwhile, MPC member Megan Greene, who voted for a rate increase in July, cautioned that a prolonged oil-price shock could entrench inflation expectations more persistently.