Sterling pinned at one-month lows as oil stays high, Fed rate hike expected
UUP•Sterling falls to one-month lows
The pound was stuck at its lowest level in more than a month against a broadly stronger dollar on Tuesday, pinned down by elevated crude oil prices ahead of this week's interest-rate decisions from the Bank of England and U.S. Federal Reserve.
Sterling GBP= eased 0.2% to $1.347, hovering near its lowest since August 7. The dollar firmed against most currencies on Tuesday as markets priced in a near-certain interest rate hike by the U.S. Federal Reserve later this week.
Higher oil prices add to inflation concerns
Oil prices rose more than 2% to $108.2 per barrel as concerns over oil supplies intensified after Iran-backed Houthi forces in Yemen launched fresh attacks on Saudi Arabia, while Gulf Arab states postponed planned discussions with Iran.
That left the kingdom's East-West Pipeline offline, raising fears that damage to energy infrastructure and transport routes could take longer to repair.
Britain is prone to risks from higher energy prices given its net oil-importer status. The spike in oil prices has led to global concerns of energy-related inflation, prompting investors to dial up expectations of interest rate hikes.
The rising bets on a Fed rate hike have supported the U.S. dollar this week. The European Central Bank also raised borrowing costs last week.
BoE seen on hold, but markets price hikes later this year
The Bank of England is expected to keep rates on hold on Thursday but traders are fully pricing in one 25 basis point rate hike and a high chance of another by year-end, according to data compiled by LSEG.
Britain's jobs market remained weak with pay growth near a six-year low, the fewest vacancies since 2021 and hiring down.
