Pound Tumbles as BoE Rate Hike Expectations Recede Ahead of Jackson Hole

The British pound has been weakening against the US dollar, headed for its first weekly drop in over a month. The UK currency eased about 0.1% to $1.3582, hitting a more than one-week low, and is set for a weekly decline of 0.4%. This comes as investors cut their bets on an interest rate hike by the Bank of England this year, with expectations now at around 25 basis points by December, down from 30 bps last week.

The war in the Middle East has kept energy prices elevated, and the current dollar strength is also contributing to the pound's losses. The euro remains broadly steady against the UK currency and is poised for a weekly gain of 0.1%, trading at around 85.69 pence.

Market analysts believe that the Bank of England will wait for the government's fiscal plans, expected in October, before making any decisions on interest rates. Ipek Ozkardeskaya, senior market analyst at Swissquote Bank, said that 'The Bank of England will wait first for the budget, for the government to set up and to reveal its own policy, and then adopt accordingly.'

The focus is now shifting to the Jackson Hole economic symposium in Wyoming, where investors are keen to hear Chairman Kevin Warsh's thoughts on monetary policy. Warsh may preview the Fed's five task forces' early findings on communications, balance sheet, economic data, productivity, and jobs.