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British pound edges higher as BoE hike odds pushed back

LSEG pricing shows markets price 24 basis points of BoE tightening by December and 36 basis points by February 2027, while only about 15% probability is implied for a hike before year end.

Reported · Written up by our desk · Major Pairs

The British pound inched up against the dollar, with GBP/USD trading around 1.3600 after two days of losses, according to FXStreet.

FXStreet reports that easing expectations for the Bank of England's next rate hike reflect declining Brent crude prices, which have reduced near term concerns about inflation pressures. LSEG pricing data cited by FXStreet shows financial markets are now pricing 24 basis points of policy tightening by December and 36 basis points by February 2027, with less than 4 basis points priced in ahead of the BoE's September meeting.

FXStreet also points to a mixed UK data backdrop. British inflation rose to 2.9% in July, driven mainly by higher household energy bills, and is projected to edge higher toward year end even as the labor market shows underlying weakness.

Strategists at Scotiabank, cited by FXStreet, argue there is limited near term support for the pound because the domestic calendar is thin ahead of next week's final PMI, and they say BoE messaging has been limited too. FXStreet adds that traders are also watching Jackson Hole in Wyoming for signals on US policy, including an upcoming speech by Federal Reserve Chairman Kevin Warsh, with Scotiabank noting 1 week implied volatility is below recent averages, suggesting complacency despite a firmer USD into the event.

Latest closeWTI crude $81.58 ▼0.9%|Brent $86.32 ▼2.5%|GBP/USD 1.359 ▼0.4%

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