Pound Surges Amid Rate Hike Bets Despite Oil Price Surge

The pound strengthened on Thursday to its highest level since August 29, despite rising oil prices and escalating Middle East tensions.

Investors have increasingly priced in further Bank of England rate hikes, with a 40% probability of at least three rate hikes by March next year. This is higher than the two Federal Reserve rate hikes expected over the same period.

The UK consumer price inflation accelerated to 2.9% in July, reinforcing expectations of tighter monetary policy. However, Bank of England Governor Andrew Bailey stressed that further monetary tightening is not guaranteed.