Pound Poised for Monthly Rebound Amid Rate-Hike Bets and Geopolitical Calm

The British pound is poised to end the month on a high note after experiencing two consecutive months of decline. Despite slipping by 0.2% against the US dollar to USD1.344, sterling is expected to post gains for the week and the month. Its performance against the euro was relatively flat on Friday but will likely show an increase in monthly gains.

The pound's resilience can be attributed to expectations of interest rate hikes by the Bank of England. Money markets are pricing in at least one 25-basis-point rate increase by year-end, according to LSEG-compiled data. Analysts from ING noted that the central bank managed to 'comfort markets about the inflation trajectory' last week, giving it more time to hold the policy rate.

The pound's performance is also influenced by geopolitical events, particularly the recent developments in the Middle East. Brent crude futures rose slightly on Friday and are set for strong monthly gains as investors assess the situation.