Sterling remained close to a six-month high against the Dollar on Tuesday, supported by expectations that the Bank of England could raise interest rates this year amid persistent inflation concerns and mounting government debt.

At the time of writing, the Pound was trading at $1.3632, while the Euro stood at 85.54 pence, Reuters news agency reports.

The Pound has gained strongly over the past four weeks, with better-than-expected economic data during the first half of the year fuelling expectations that the Bank of England could deliver at least a 25-basis-point rate hike before year-end, according to LSEG data.

However, most economists and analysts expect interest rates to remain unchanged, increasing the risk that the Pound could weaken later this year.

Indeed, ING FX strategist Francesco Pesole said the bank expected the Euro to strengthen against the Pound, reflecting its view that the Bank of England would tighten monetary policy less aggressively than current market pricing suggests.

“We still ​expect no hikes and a move to £0.870 in the coming months,” he said.

A move to 87 pence would represent a decline of at least 2% from Tuesday’s trading levels.

Global currency markets were largely steady as investors digested the latest US sanctions on Iran. The measures did not target China or Chinese entities, easing concerns that sanctions against Beijing could trigger a retaliatory response.

Moreover, rising government debt has also remained a key focus this month, after the US Treasury said it planned to increase buybacks of longer-dated government bonds to help contain the recent surge in yields.

UK gilt yields are among the highest across developed economies, with the next major test for bond maturities and Sterling expected to come with Andy Burnham’s government budget, due in October.

Furthermore, on Tuesday, Britain announced plans to invest £10 billion in more affordable rental housing, with a particular focus on London.

Investors will be closely watching whether the government intends to finance its fiscal agenda through additional borrowing or higher taxes, particularly as Burnham has previously unveiled measures aimed at easing the cost burden on households.