FX.co ★ Sterling Tries to Recover

Sterling hovered around $1.323, attempting to rebound from recent lows as investors balanced a pause in the oil price rally against persistent inflation risks and the likelihood that interest rates will stay elevated for an extended period. The pound also found support after the IMF raised its UK growth forecast, now expecting the economy to expand by 1.3% this year, up from 1.0% in its July projection.

On the monetary policy front, hawkish Bank of England policymaker Megan Greene argued that stronger-than-expected economic growth and a resilient labor market suggest interest rates may need to rise above the current 3.75% to bring inflation under control. Financial markets are currently pricing in four rate increases over the next 12 months, though many analysts see this as excessive, pointing out that several policymakers already regard the existing policy rate as above its neutral level.