The pound traded just shy of $1.34, near its strongest level since June 16, and reached a fresh one-year high against the euro as investors ramped up bets on Bank of England rate hikes.
Rising oil prices, with crude above $72 per barrel after Strait of Hormuz attacks, and inflation concerns drove the shift, with markets pricing in a 76% chance of a hike by year-end and over 50% odds for November.
Bank of England Governor Andrew Bailey recently reiterated that inflation remains on track to hit 2%, though later than previously forecast, and ruled out near-term rate cuts.
Politically, Andy Burnham, the frontrunner to succeed Keir Starmer as prime minister, has yet to name a finance minister, with former energy minister Ed Miliband seen as the likely choice.
Sterling’s resilience amid recent political turmoil suggests much of the negative news has already been priced in.