GBP strengthens as markets price over 50% chance of a Bank of England rate hike by September amid inflation concerns.
The British Pound remains the second-best performing G10 currency against the US Dollar since late February, driven by expectations of sustained Bank of England rate hike pricing. While the BoE is widely expected to hold rates in its July decision, inflation risks and energy price pass-through concerns keep hike bets alive.
Markets have priced a 50% chance of a September hike, with a full hike expected by November. The BoE’s Monetary Policy Committee remains divided, with some members wary of inflation persistence despite weak domestic economic conditions. Today’s decision will be scrutinized for shifts in tone or voting patterns.
FX volatility remains low, and favorable market conditions continue to support GBP. A stronger signal toward a September hike could push sterling higher, though conviction remains uncertain.