Sterling Slips as Investors Pare BoE Rate Hike Bets Ahead of Jackson Hole

The British pound, or Sterling, has slipped to a one-week low against both the US dollar and the euro as investors reassess their expectations for an interest rate hike by the Bank of England (BoE) this year. The pound has retreated from its six-month high reached last week, with a 0.1% dip to $1.3578 on Thursday.

According to LSEG data, traders now expect the BoE to raise interest rates by 24.7 basis points by December, down from their previous expectation of a 25-basis point hike this year. This shift in expectations is in line with most economists' predictions, as reflected in Reuters polls.

Two-year gilt yields, which move in tandem with rate expectations, have also softened slightly to 4.36%. The decline comes as Brent crude prices hover near a two-week low, with investors watching mediation efforts to end the Mideast conflict.

Chris Beauchamp, chief market analyst at IG Markets, expressed skepticism about the BoE increasing borrowing costs this year, saying it would 'probably make life unnecessarily tricky for the UK economy and certainly for the government as well.'