FX.co ★ Sterling Slightly Up as BoE Hike Bets Rise

Sterling inched up to $1.325 but remained near a three‑month low, as investors weighed a series of hawkish remarks from Bank of England policymakers against mounting expectations of further Federal Reserve rate hikes, which continued to underpin the US dollar. BoE Governor Andrew Bailey warned that persistently elevated energy prices would make it more difficult for the central bank to keep interest rates unchanged. At the same time, MPC members Sarah Breeden and Clare Lombardelli indicated they were moving closer to backing a rate increase, citing the risk that higher energy costs would keep inflation above the 2% target.

Their warnings come at a delicate moment for Prime Minister Burnham and Chancellor Healey, who are trying to alleviate cost‑of‑living pressures while preserving confidence in the economic outlook ahead of the October 28 budget. Money markets now assign roughly an 80% probability to a BoE rate hike in November and are pricing in a little more than four 25‑basis‑point increases over the coming year.