Sterling extended its recent rally, climbing to $1.347—its highest level since September 15—as investors sold off the US dollar following a sweeping Democratic win in the midterm elections that handed the party control of both chambers of Congress. The unexpected political shift pressured the greenback, while AI stocks and cryptocurrencies also retreated amid fears of tighter regulatory oversight.
At the same time, the pound drew additional support from expectations that the Bank of England will resume monetary tightening on Thursday, with markets widely anticipating the first interest rate increase since 2023. Mounting inflationary pressures linked to the Iran war, combined with signs of resilience in the UK economy, have reinforced the case for higher borrowing costs. Still, policymakers are expected to push back against market bets on multiple further rate hikes next year.