Pound Poised for Monthly Gains Amid Rate-Hike Bets and Oil Price Volatility

The British pound is poised for monthly gains against both the US dollar and euro as expectations of interest-rate hikes continue to drive market sentiment.

This week, the Bank of England kept interest rates on hold, but money markets are pricing in at least one 25-basis-point rate increase by the year-end.

The UK's economy is heavily dependent on energy imports, which makes it sensitive to big swings in oil prices. Brent crude futures have ticked around 1% higher and are set for strong monthly gains as investors assess the developments in the Middle East.

Renewed rate-hike bets and signs of political stability underpin the pound's recent performance. The currency has outperformed the dollar among G10 currencies this year, with the Bank of England keeping interest rates on hold as it waits for a keener sense of how much the US-Iran war will push up inflation.