Pound Surges to Highest Level Since August as BoE Rate Hike Bets Build

The pound has risen to its highest level since August 29, despite increasing oil prices and escalating tensions in the Middle East. Sterling is up 0.07% at 1.3554, while the euro is also higher by 0.08% at 1.1639.

This strength comes from a reassessment of the Bank of England's monetary policy outlook. Investors expect two rate hikes by March next year, with about a 40% probability of a third. By comparison, investors currently expect only two Federal Reserve rate hikes over the same period.

UK consumer price inflation accelerated to 2.9% in July from 2.6% the previous month, reinforcing expectations of tighter monetary policy. However, Bank of England Governor Andrew Bailey has stressed that further monetary tightening is not guaranteed, and elevated oil prices and fiscal risks ahead of the autumn Budget are adding to uncertainty.