Pound Ticks Up as Oil Price Drop Eases Inflation Concerns

The Pound has ticked up to $1.3330 as Brent crude oil prices slid 9% to $87.84 per barrel, easing concerns about UK inflation and Bank of England rate hikes.

Despite inflation undershooting forecasts in June, the BoE is still expected to hold Bank Rate at 3.75% on Thursday, with futures markets putting the odds of a September hike at around 50-50.

The drop in oil prices has taken some heat off the 'rates higher for longer' story, and bond traders have responded by bidding up short-dated UK government bonds, with the 2-year gilt yield falling 6 basis points to 4.362%.

This shift is significant because it suggests investors expect fewer rate hikes, which could impact the Pound's strength against the dollar.