Sterling Edges Lower as Oil Surge Lifts Inflation Concerns
The British pound weakened against the United States dollar on Monday as higher oil prices and increased concerns that inflation could accelerate due to renewed fighting between the United States and Iran unsettled currency markets. The US and Iran exchanged missile and drone attacks through the weekend and Monday, while Tehran again announced the closure of the Strait of Hormuz, pushing Brent crude higher. The dollar strengthened as investors sought safer assets, while markets raised expectations for additional Federal Reserve interest rate increases this year. Money markets priced 37 basis points of Federal Reserve tightening compared with 33 basis points for the Bank of England, although sterling has stayed relatively resilient this year as Britain's economy has exceeded expectations. At the time of writing, GBP/USD was trading at 1.3386, down 0.12%, while the United Overseas Bank predicted earlier in the day that "the rapid increase in momentum suggests GBP could break below 1.3360, potentially testing 1.3340."
The British pound weakened against the United States dollar on Monday as higher oil prices and increased concerns that inflation could accelerate due to renewed fighting between the United States and Iran unsettled currency markets.
The US and Iran exchanged missile and drone attacks through the weekend and Monday, while Tehran again announced the closure of the Strait of Hormuz, pushing Brent crude higher.
The dollar strengthened as investors sought safer assets, while markets raised expectations for additional Federal Reserve interest rate increases this year.
Money markets priced 37 basis points of Federal Reserve tightening compared with 33 basis points for the Bank of England, although sterling has stayed relatively resilient this year as Britain's economy has exceeded expectations.
At the time of writing, GBP/USD was trading at 1.3386, down 0.12%, while the United Overseas Bank predicted earlier in the day that "the rapid increase in momentum suggests GBP could break below 1.3360, potentially testing 1.3340."