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2026.07.0908:56:08UTC+00Pound Climbs to Three-Week High on BoE Rate Hike Bets

The pound climbed back above $1.34, its highest level since mid-June, as investors increased bets on further Bank of England interest rate hikes amid rising tensions between the US and Iran. Market participants also digested comments from US President Donald Trump, who said Iran still wants to reach a deal “badly.”

Crude oil prices hit two-week highs on Wednesday following fresh US strikes in Iran, after Trump declared the Iran ceasefire over. The renewed conflict has cast fresh doubt on the durability of the peace agreement and intensified concerns about inflationary pressures.

Money markets now fully price in a 25-basis-point BoE rate increase by year-end, with December seen as the most likely timing. On the domestic political front, Andy Burnham, the leading contender to succeed Keir Starmer as prime minister, has yet to announce his choice for finance minister, though former energy minister Ed Miliband is widely viewed as the frontrunner.

Sterling’s resilience in the face of recent political turbulence suggests that much of the negative news has already been reflected in the currency’s valuation.

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