Pound Sterling Slips as Rate Hike Bets Eased

The pound sterling is set to close its first week of decline in over a month against the US dollar, as traders moderate their expectations for a Bank of England interest rate hike this year.

According to LSEG-compiled data, market pricing now reflects only 25 basis points of BoE hikes by December, down from 30 basis points last week. This shift in expectations has contributed to the pound's decline, which is currently trading at $1.3582, its lowest level in over a week.

Ipek Ozkardeskaya, senior market analyst at Swissquote Bank, notes that the Bank of England may wait for the UK government's budget and policy direction before adjusting its stance. She suggests that if the Burnham government's budget is less costly, growth could be weaker but inflation pressure could also ease, allowing the central bank to remain cautious for longer.

Investors are now looking ahead to the Jackson Hole economic symposium in Wyoming, where Chair Kevin Warsh will provide keynotes on the monetary policy outlook. Markets are sensitive to any hints about Warsh's policy reaction function and the future path of interest rates.