Sterling held above $1.335, its highest level in a month, as stronger-than-expected UK economic data reinforced expectations of a Bank of England rate hike next month. UK inflation climbed to 3.5% in September, its highest level since October 2025, exceeding forecasts of 3.4%, driven by motor fuels. Core and services inflation also came in above expectations. Public sector net borrowing reached GBP 24.5 billion, higher than forecast, ahead of next week’s budget. The data follow signs of a resilient economy, including an unexpected fall in unemployment, 0.1% GDP growth in August and a narrower trade deficit. Markets are now fully pricing in a 25-basis-point increase in Bank Rate in November. The central bank has so far been the only major central bank yet to begin a policy-tightening cycle. However, Governor Andrew Bailey’s recent remarks suggesting that a prolonged war could increase pressure on policymakers to act suggest that a rate hike may be approaching.