Sterling Under Pressure as BoE Rate-Hike Bets Ease

2026-09-21 08:51 By Joana Ferreira 1 min. read

Sterling remained below $1.34 as traders slightly pared back expectations for Bank of England rate hikes amid a decline in oil prices.

Brent eased toward $100 a barrel after US President Trump left the door open to diplomacy with Iran, helping to reduce fears of an imminent supply shock, while stronger regional crude flows have further eased pressure on physical markets.

UK policymakers made clear last week that the outlook for inflation, and therefore interest rates, will depend heavily on the path of oil and gas prices in the coming months.

Markets currently price around an 80% chance of a rate hike at the November meeting, with roughly a 56% probability of a second increase by year-end.

Meanwhile, investors are turning their attention to next month’s Autumn Budget, with the government reportedly considering plans to extend a new property tax to homes worth more than £1.5 million.

Elsewhere, the USD remained supported by expectations of further interest-rate hikes from the Fed.



News Stream
Sterling Under Pressure as BoE Rate-Hike Bets Ease
Sterling remained below $1.34 as traders slightly pared back expectations for Bank of England rate hikes amid a decline in oil prices. Brent eased toward $100 a barrel after US President Trump left the door open to diplomacy with Iran, helping to reduce fears of an imminent supply shock, while stronger regional crude flows have further eased pressure on physical markets. UK policymakers made clear last week that the outlook for inflation, and therefore interest rates, will depend heavily on the path of oil and gas prices in the coming months. Markets currently price around an 80% chance of a rate hike at the November meeting, with roughly a 56% probability of a second increase by year-end. Meanwhile, investors are turning their attention to next month’s Autumn Budget, with the government reportedly considering plans to extend a new property tax to homes worth more than £1.5 million. Elsewhere, the USD remained supported by expectations of further interest-rate hikes from the Fed.
2026-09-21
Pound Holds Near July Low
The British pound was little changed at $1.335, remaining near its weakest level since late July, as investors weighed stronger-than-expected retail sales and this week’s central bank decisions. UK retail sales rose 0.5% in August, defying expectations for a 0.2% decline and rebounding from July’s fall. Department stores led the recovery as retailers resolved stock availability issues, pointing to resilient consumer spending despite elevated energy prices and the prospect of tighter monetary policy. The Bank of England held rates steady on Thursday and said it would stop selling very long-dated gilts under its quantitative tightening programme, while warning that a prolonged Middle East conflict could prompt tighter policy. The Federal Reserve and Bank of Japan also raised rates this week and signaled scope for further tightening this year.
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Sterling Holds Near Two-Month Low as BoE Keeps Rates Steady
The British pound held just below $1.34, near its weakest level since late July, after the Bank of England kept rates at 3.75% in a 6-3 vote, and warned that rates could need to rise if inflationary pressures intensify due to the conflict in the Middle East. In prepared remarks, Governor Andrew Bailey said the global energy shock has so far had a limited impact on UK prices and wages, but warned that prolonged volatility could put greater pressure on inflation and increase the need for a rate hike. The MPC also unanimously voted to reduce its stock of UK government bond purchases to zero through a multi-year programme, with an average annual pace of £46 billion through 2034, slower than previously and below the £50 billion expected by markets. The BoE now expects inflation to reach twice its 2% target early next year, while raising its third-quarter GDP forecast to 0.4%. Meanwhile, the Fed raised rates by 25 basis points yesterday and signaled another hike later this year.
2026-09-17