Sterling Slides on Energy Shock Fears

2026-03-20 10:39 By Joana Ferreira 1 min. read

The British pound fell back below $1.34 by the end of a turbulent week, as investors sought safety in the US dollar amid escalating concerns over inflation fueled by the Iran conflict’s energy price surge.

Brent crude and European gas prices hit multi-year highs, amplifying pressure on the UK economy and reinforcing expectations of three Bank of England rate hikes in 2026.

The BoE unanimously held rates at 3.75% on Thursday while cautioning that the Middle East crisis could push global energy and commodity costs even higher.

Policymakers now project a near-term CPI inflation rebound, reversing recent progress in cooling domestic price and wage growth.

Adding to economic strains, UK public sector borrowing jumped to £14.3 billion in February 2026, up from £12.1 billion a year ago and exceeding consensus estimates of £8.5 billion.

The figure represents the second-highest February borrowing since records began, surpassed only by 2021.



News Stream
Sterling Slides on Energy Shock Fears
The British pound fell back below $1.34 by the end of a turbulent week, as investors sought safety in the US dollar amid escalating concerns over inflation fueled by the Iran conflict’s energy price surge. Brent crude and European gas prices hit multi-year highs, amplifying pressure on the UK economy and reinforcing expectations of three Bank of England rate hikes in 2026. The BoE unanimously held rates at 3.75% on Thursday while cautioning that the Middle East crisis could push global energy and commodity costs even higher. Policymakers now project a near-term CPI inflation rebound, reversing recent progress in cooling domestic price and wage growth. Adding to economic strains, UK public sector borrowing jumped to £14.3 billion in February 2026, up from £12.1 billion a year ago and exceeding consensus estimates of £8.5 billion. The figure represents the second-highest February borrowing since records began, surpassed only by 2021.
2026-03-20
Sterling Tops $1.33 as BoE’s Hawkish Hold Reshapes Rate Outlook
The British pound rose above $1.33 after the Bank of England unanimously held rates at 3.75%, adopting a more hawkish tone than anticipated. Markets had expected a 7-2 vote for steady rates, but policymakers warned that the Middle East conflict’s impact on soaring energy and commodity prices could push near-term inflation higher, reversing recent disinflation in domestic prices and wages. Traders now fully price in two BoE rate hikes this year, as European gas prices surged following attacks on Qatar’s LNG facilities and Brent crude hit $117/barrel, amplifying UK inflation risks. On the economic front, the latest UK jobs report showed slowing wage growth and unemployment holding at 5.2%, both missing forecasts.
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Pound Steady Ahead of BoE Decision
The British pound held near $1.327 on Thursday as investors balanced escalating energy costs against weaker-than-expected UK wage growth, just hours before the Bank of England’s interest rate decision. European natural gas prices spiked 25% after attacks on critical LNG facilities in Qatar, while Brent crude surged to $117/barrel, heightening inflation risks for the UK economy. Markets now anticipate a more hawkish stance from the BoE, though the central bank is widely expected to hold rates today. Looking ahead, traders are pricing in about 32 basis points of tightening by year-end, equivalent to more than a quarter-point hike, with more than a 50% chance of a June rate increase and a full hike priced in by September. Meanwhile, the latest UK jobs report revealed slowing wage growth and unemployment steady at 5.2%, both below expectations.
2026-03-19