16.04.202608:22:58UTC+00Sterling Eases from 8-Week High

The British pound edged down toward $1.356 as traders scaled back expectations for an imminent Bank of England rate hike, amid growing optimism that the Middle East conflict may be drawing to a close. Policymakers have signaled little urgency to tighten monetary policy: Governor Andrew Bailey said it is too early to judge the war’s impact, characterizing it as a major energy shock whose duration will be crucial in determining the inflation outlook. Similarly, policymaker Megan Greene said markets were right to pare back earlier, more aggressive rate hike bets.

The conflict is still expected to weigh heavily on the UK economy, pushing up borrowing costs and inflation while restraining growth prospects ahead of the April 30 policy meeting. Even so, recent data indicate the economy had solid momentum before the onset of the war, with GDP expanding 0.5% in February. Sterling remains close to an eight-week high and is up about 2.6% so far in April, supported by hopes for a negotiated peace.