Pound Surges as Investors Price in Tighter BoE Policy Amid Rising Inflation Pressures
The pound has made a comeback against both the dollar and euro as investors expect the Bank of England to tighten monetary policy due to rising inflation pressures.
After hitting a three-month low of $1.3204 last week, sterling is now up 0.1% against the dollar at $1.3259 and 0.2% against the euro at 85.75 pence.
The Bank of England has so far refrained from raising interest rates while other central banks have responded to energy-induced inflation by increasing rates.
Oil prices rose over 3% on Monday, with benchmark British natural gas prices also up after US President Donald Trump rejected an Iranian proposal to reopen the Strait of Hormuz and end the war in the Middle East.
BoE Governor Andrew Bailey said persistently high energy prices would make it harder for the central bank to keep interest rates on hold, while Deputy Governor Dave Ramsden suggested that if upside inflation pressures continue building, there could be a case for increasing interest rates.