The British pound weakened to around $1.35 as the dollar strengthened, even as markets increasingly anticipated further Bank of England rate hikes. Rising energy prices, an ECB (European Central Bank) rate increase and a more hawkish inflation outlook put additional pressure on UK yields. Brent crude rose above $100 a barrel, while UK natural gas prices reached their highest level since late 2022 amid heightened concerns about energy supplies linked to escalating Middle East tensions. Markets are now fully pricing four Bank of England rate increases by the end of 2027. Governor Andrew Bailey rejected the view that another increase is inevitable, saying future decisions will depend on changing economic and geopolitical conditions. The dollar also benefited from stronger-than-expected US PPI (Producer Price Index) data, which pushed the implied probability of a Federal Reserve rate hike next week above 70%.