FX.co ★ Pound Rises on UK Political Shift, Rate Hikes Bets

The pound climbed to $1.34, returning to levels last seen in mid-June, as investors refocused on UK politics. Attention has shifted to Andy Burnham, who is set to succeed Keir Starmer as prime minister on July 20, and to his choice of finance minister. Betting markets currently favor Ed Miliband for the role, and he is widely regarded as inclined toward more expansionary fiscal policy. Investors also monitored intensifying tensions in the Middle East, rising oil prices, and mounting inflation risks. The US military continued strikes against Iran after President Donald Trump reinstated a blockade on Iranian shipping and proposed a 20% fee to secure passage through the Strait of Hormuz, amplifying uncertainty over global energy supplies. In response, markets increased expectations for further Bank of England rate hikes, now almost fully pricing in two increases in 2026 and fully pricing in a September move. In the US, softer June inflation data eased pressure on the Federal Reserve to raise rates, although Governor Christopher Waller cautioned that further tightening remains possible if inflation stays above the 2% target.