30.09.202609:27:41UTC+00Sterling Recovers but Ends September Lower

Sterling edged back toward $1.33 at the end of September, rebounding from a three‑month low of $1.32 earlier in the week. The recovery was underpinned by stronger‑than‑expected GDP data and comments from Prime Minister Andy Burnham on the UK’s future relationship with the EU. Despite this late support, the pound still declined about 2% against the dollar over the month, as markets continued to expect the Bank of England (BoE) to lag the Federal Reserve in policy tightening.

Burnham signalled that the government could consider rejoining the EU after the next general election and pledged to present options for closer ties later this year. At the same time, revised figures showed UK GDP expanded by 0.5% in the second quarter, up from a previous estimate of 0.4%.

Messaging from the BoE remained mixed. Alan Taylor downplayed the need for further interest rate increases to counter the energy‑driven shock, whereas Governor Andrew Bailey and several other Monetary Policy Committee members indicated they would be prepared to back additional hikes if inflationary pressures prove persistent.

In the United States, traders pared back expectations of an October rate increase after New York Fed President John Williams said policymakers still had time to evaluate incoming data before deciding whether to tighten policy again.