Sterling extends weekly rise as oil steadies and BoE rate expectations hold

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Sterling extends weekly rise

Highlights

Sterling rises 0.3% to $1.346 for the day and 0.1% for the week as Brent crude steadies near $95 and geopolitical risks ease.
A Bank of England survey shows UK businesses expect slower price increases, reinforcing market expectations of no BoE rate change this month.
Halifax reports British house prices fell 0.1% in May, up only 0.5% year-on-year, missing forecasts of a 0.1% monthly gain and 1.0% annual rise.

Market drivers before U.S. payrolls

As reported by Reuters, the pound gains alongside the Australian and New Zealand dollars as Brent crude holds near $95 a barrel and investors judge that the absence of a fresh escalation tied to stalled United States-Iran peace talks is helping stabilize sentiment.

Sterling is up 0.3% at $1.346 and is ahead 0.1% for the week against the dollar. The euro also softens slightly against the pound, slipping 0.1% to 0.8639 pounds, while markets wait for the U.S. nonfarm payrolls report later on Friday.

Investors expect the U.S. report to show 85,000 jobs were added in May, after a gain of 115,000 in April. The data is likely to shape near-term dollar moves and could influence whether sterling holds its current weekly advance.

BoE outlook and UK economic signals

A Bank of England survey suggests British businesses expect to raise prices less quickly over the coming year than they did in April, indicating that some of the initial energy shock from the Iran war is fading. ING strategists say the survey reinforces expectations that the central bank keeps rates unchanged later this month and reduces the case for broader rate increases.

Money markets show traders expect no move from the BoE at its upcoming meeting, with the first rate increase priced around September and roughly a 50% chance of a second by year-end. While higher rates would usually support a currency, markets are also weighing the risk that tighter borrowing costs add pressure on consumers and businesses as UK growth falters and inflation picks up.

Fresh housing data adds to that mixed domestic picture. Halifax says British house prices unexpectedly fall 0.1% in May, leaving them 0.5% higher than a year earlier, below economists' expectations for a 0.1% monthly increase and a 1.0% annual rise.

Our earlier article on the Bank of England’s Decision Maker Panel survey highlighted that UK businesses expected to raise prices more slowly over the next 12 months, suggesting the initial energy-cost shock linked to the Iran war was starting to fade. However, it also noted that price expectations remained elevated compared with pre-conflict levels, while wage expectations were steadier—leaving a mixed picture for the UK inflation outlook and the BoE’s policy path.

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