Sterling Holds Above $1.32 as UK Inflation Concerns Persist

2026-10-06 10:02 By Joana Ferreira 1 min. read

Sterling traded slightly above $1.32 as elevated energy costs and persistent inflation concerns reinforced expectations for UK interest rates to remain higher for longer.

BoE policymaker Catherine Mann said on Tuesday that inflation above the Bank’s 2% target appeared to have become embedded in the economy.

She warned that inflation could reach 4% around the turn of the year, when wage negotiations typically take place, potentially adding to price pressures.

Mann has been among a minority on the MPC voting for a 25-bp rate hike to 4% since July.

Meanwhile, weaker-than-expected US PCE inflation and jobs data last week strengthened expectations that the Federal Reserve could leave rates unchanged in October, with a December move now seen as more likely.

In the UK, construction activity continued to contract in September, though less than expected, while builders grew more cautious about the outlook amid higher rates, inflation, weak orders and Middle East uncertainty.



News Stream
Sterling Holds Above $1.32 as UK Inflation Concerns Persist
Sterling traded slightly above $1.32 as elevated energy costs and persistent inflation concerns reinforced expectations for UK interest rates to remain higher for longer. BoE policymaker Catherine Mann said on Tuesday that inflation above the Bank’s 2% target appeared to have become embedded in the economy. She warned that inflation could reach 4% around the turn of the year, when wage negotiations typically take place, potentially adding to price pressures. Mann has been among a minority on the MPC voting for a 25-bp rate hike to 4% since July. Meanwhile, weaker-than-expected US PCE inflation and jobs data last week strengthened expectations that the Federal Reserve could leave rates unchanged in October, with a December move now seen as more likely. In the UK, construction activity continued to contract in September, though less than expected, while builders grew more cautious about the outlook amid higher rates, inflation, weak orders and Middle East uncertainty.
2026-10-06
Sterling Rebounds as Weak US Jobs Data Weighs on Dollar
Sterling extended gains above $1.32, recovering from its weakest level in three months as weaker-than-expected US employment data weighed on the dollar. The US economy added just 29,000 jobs in September, well below expectations of 90,000, strengthening expectations that the Federal Reserve may leave rates unchanged in October, while a December move is seen as more likely. Meanwhile, markets are pricing around 30 basis points of Bank of England tightening by year-end and roughly 90 bps by the end of 2027. Several policymakers, including Governor Andrew Bailey, have signaled greater openness to higher rates as rising energy costs increase the risk of inflation remaining above target. Elsewhere, sterling received support from comments by Prime Minister Andy Burnham favoring closer UK-EU ties ahead of a summit expected around November 20, including the possibility of revisiting EU membership after the next general election.
2026-10-02
Sterling Slips as Oil Prices Fuel Inflation Concerns
Sterling weakened to around $1.32 at the start of October, near three-month lows, after falling 2% against the US dollar in September as high oil prices fueled inflation concerns, pushed bond yields higher and clouded the UK growth outlook. Markets expect the Bank of England to tighten policy more slowly than the Federal Reserve, with LSEG data showing investors pricing in four BoE rate hikes by July 2027, including a first move in November. Several policymakers, including Governor Andrew Bailey, have signaled greater openness to higher rates as energy costs raise the risk of inflation staying above target. In the US, markets still see a near 40% chance of a rate hike this month. Elsewhere, investors welcomed Prime Minister Andy Burnham’s comments on closer UK-EU ties, including the possibility of reopening the question of EU membership after the next general election.
2026-10-01