Pound Rises on Rate Hike Expectations Amid Rising Energy Costs

The British pound strengthened on Wednesday, nearing two-week highs against the US dollar as investors continue to expect interest rate hikes by the Bank of England.

The pound reached a high of $1.3545, its strongest level since August 28, despite crude oil prices rising above $100 per barrel due to Middle East tensions. This surge in energy costs is expected to put pressure on central banks to raise rates and combat inflation.

Bank of England Governor Andrew Bailey has pushed back against the idea of a rate hike being inevitable, stating that there is no 'secret plan' for increases. Despite this, markets still predict at least two rate hikes by March next year, with a 40% chance of a third increase.