07.10.202609:31:06UTC+00Sterling Slips as Oil Rebound Revives Inflation Concerns

Sterling traded around $1.32, hovering near the three-month low against the dollar it hit last week, as rebounding oil prices stoked inflation concerns and strengthened expectations that UK interest rates will stay higher for longer. Brent crude climbed back above $100 a barrel after Iran stepped up attacks on shipping in the Strait of Hormuz, prompting markets to price in more than 100 basis points of additional Bank of England tightening by the end of next year. BoE policymaker Catherine Mann said on Tuesday that inflation above the Bank’s 2% target now appears entrenched in the economy and warned it could approach 4% around the turn of the year, when wage negotiations typically occur. At the same time, the dollar remained supported by expectations that the Federal Reserve will raise rates for a second time this year in December. Against the euro, sterling rose to its strongest level since June of last year, as mounting concern over France’s deepening fiscal crisis weighed on the single currency.