Pound Falls Amid Fed Rate Hike Bets and Easing Inflation Pressures

The British pound has fallen to its weakest level in over three weeks against the US dollar as investors anticipate a rate hike from the Federal Reserve. The dollar's strength is fueled by increased bets on a U.S. interest rate increase, with traders pricing in a nearly 40% chance of a quarter-point rise.

The move comes as Brent crude prices drop 2.6% to $86.08 a barrel, easing inflation pressures and contributing to the pound's decline. The Bank of England is expected to hold rates steady this week, with two-year gilt yields falling 3 basis points to 4.352%. Soft labor market data has cemented expectations that the BoE will maintain its current monetary policy.

Prime Minister Andy Burnham's government spending plans have also added to pressure on the pound. Burnham has ruled out changes to stamp duty, a tax on home sales, at the next budget due later in the year.