FX.co ★ Pound Climbs Above $1.34 as Rate-Cut Expectations Ease

The British pound extended its gains above $1.34, marking its highest level so far this month and pulling further away from the three-month lows hit recently. The move was supported by a modest improvement in overall risk sentiment and by investors scaling back expectations for Bank of England interest-rate cuts in 2026.

Oil prices remained below $90 per barrel after the International Energy Agency proposed an unprecedented release of strategic oil reserves to counter the sharp rise in energy costs since the start of the Iran conflict. This action helped ease some of the inflation concerns that had recently pressured financial markets.

On the monetary policy front, traders have significantly reduced expectations for near-term easing. Markets are now pricing in only about four basis points of cuts, after having been roughly evenly split on the likelihood of a rate reduction at the previous session’s close. Investors are also awaiting upcoming UK economic data, including monthly GDP figures due on Friday.