Stefano Rebaudo

Sterling hit the lowest level in almost three months against the dollar and edged down versus the euro on Thursday, as ​investors singled out the pound as a key casualty of the ‌dollar repricing sparked by Federal Reserve’s hawkish shift last week.

Major central banks are on a tightening path, with the Federal Reserve recalibrating its policy to a more restrictive stance on Wednesday, even as traders continue to price in a more aggressive policy response ​than projected in the U.S. central bank's so-called dot plot.

Sterling was little changed on Thursday after the Federal Reserve policy meeting with investors awaiting the Bank of England rate decision later in the session.

The surge in energy and global borrowing costs as a result of the war in the Middle East is pushing economies and markets ​further towards a potentially damaging period of high inflation and slow growth.

Next week's much-anticipated U.S. and Japanese central bank meetings could bring monetary tightening too.

The European Central Bank is widely expected to hike interest rates on Thursday, erring on the side of caution as the U.S.-Iran wardrags on, keeping oil prices high ​and raising inflation again.

Money markets are bracing for an increasingly hawkish European ​Central Bank, wagering that geopolitical tensions will complicate its inflation battle and keep price pressures stubborn enough to lift the key ‌deposit rate to almost 3% by late 2027.

Global equities rose on Thursday as investors pared back their bets on a U.S. rate hike, while oil prices fell ​more than 2% as higher inventories and lower global demand forecasts offset geopolitical concerns.

Sterling hovered around its one-month high against the dollar on Wednesday as investors braced for a raft of British and U.S. economic ​data later this week.

Sterling broke a three-day winning streak against the dollar while dropping versus the yen as investors closely watch the U.S. rate path and ​authorities' interventions to support the Japanese currency.