Sterling/dollar held firm around the mid-1.35 range in the New York market, while sterling/yen was somewhat soft in the low 216 range. Expectations that the Bank of England will leave interest rates unchanged, US interest-rate trends and higher crude oil prices are driving the market.
Sterling/dollar held firm in the mid-$1.35 range today, while sterling/yen was somewhat soft in the low 216 range. There were few sterling-specific factors, with the dollar's movements and higher crude oil prices, driven by heightened tensions surrounding the US and Iran, affecting the market.
Expectations of an additional Bank of England rate hike have not strengthened, and the prevailing view is that the policy rate will remain unchanged for the time being. However, inflationary pressures remain strong, and expectations that high interest rates will persist are supporting sterling.
Higher crude oil prices are a complex factor for sterling. They reinforce expectations that the Bank of England will maintain high interest rates for an extended period, but could also become a headwind if the resulting burden on households and businesses and concerns about an economic downturn intensify. They therefore cannot be viewed simply as a positive factor for sterling.