Pound Hits Six-Month High on Rate Hike Bets

The pound has reached its strongest level in six months, trading at $1.3632 against the US dollar as investors expect the Bank of England to raise interest rates by at least 25 basis points this year.

Francesco Pesole, FX strategist at ING, disagrees with market expectations and predicts no rate hikes from the BoE, which could lead to a strengthening of the euro against sterling. He estimates that if his prediction comes true, the euro will rise to 87 pence, resulting in a potential 2% fall in sterling from current levels.

The UK government's housing plan for renters, worth £10 billion ($13.6 billion), is also drawing investor attention as they scrutinize budget funding and implications for gilt yields. The October budget will be a crucial test for both bond maturities and the pound's value.