FX.co ★ Sterling Holds at One-Month High

The pound held at $1.34, its highest level in more than a month, as rising borrowing costs across the eurozone led to outflows from regional assets and boosted demand for UK bonds and the currency. Sterling was further supported by stronger‑than‑expected UK inflation data: annual inflation rose to 3.5% in September, its highest since October 2025 and above forecasts of 3.4%. Core and services inflation also came in above expectations, prompting markets to increase bets on further monetary tightening. Money markets are now pricing in at least three quarter‑point rate hikes by April 2027, with the first potentially as soon as November 5.

At the same time, elevated oil prices, the rising cost of AI infrastructure investment, and mounting debt burdens in highly indebted countries such as France weighed on risk appetite. Investors are also looking ahead to next week’s budget, where Chancellor John Healey is expected to stress fiscal discipline, a stance that could further support demand for gilts.