Sterling Plummeted to One-Month Low as Oil Prices Soar and Fed Rate Hike Looms

Sterling has dropped to its lowest level in over a month against the US dollar due to high oil prices and expectations of an imminent interest-rate hike by the Federal Reserve. The pound eased 0.2% to $1.347, hovering near its lowest since August 7.

The rise in oil prices above $108 per barrel has intensified concerns about global energy supplies following attacks on Saudi Arabia's East-West Pipeline. This development has led markets to price in a near-certain interest rate hike by the US Federal Reserve this week, which is further supporting the dollar.

Despite the UK's weak labour market indicators and slowing pay growth, traders are fully pricing in one 25 basis point rate hike by year-end, according to data compiled by LSEG. The Bank of England is expected to keep rates on hold on Thursday but there is rising speculation about policy shifts amid global risks.