Pound Plunges to Three-Month Low as Hawkish Hints Fail to Support Sterling

The British pound has fallen to a three-month low against the US dollar as Bank of England officials hint at raising interest rates. Despite this, the GBP/USD pair dropped for a fourth consecutive session, reaching just above 1.3200. This comes as New York Fed President Williams and Philadelphia Fed President Paulson suggested that further tightening may be necessary in the US.

The Federal Reserve is set to make its decision on interest rates on October 28, eight days before the Bank of England's meeting on November 5. Markets are already expecting a rate hike from the BoE, with an implied probability of around 75% for a quarter-point increase. This would take the Bank Rate to 4%, matching the top of the Federal Reserve's current range.

The UK economy is also facing headwinds as Washington and Tehran negotiators consider a phased agreement that could see Iran reopen the Strait of Hormuz, potentially leading to higher oil prices. Brent crude has already reached above $106 a barrel, stoking inflation fears.