Sterling Suffers Amid Rising Oil Prices and Diverging Interest Rate Expectations

The British pound hit a one-month low against the US dollar due to rising oil prices. On September 14, sterling fell to $1.3474, its weakest reading since August 7.

This drop was not driven by domestic factors but rather by events in Saudi Arabia, where Houthi strikes forced the closure of a critical pipeline. The resulting surge in Brent crude prices led to a 3% jump to $108 per barrel.

The dollar tends to rise when global uncertainty increases, and this situation is no exception. As oil is priced in dollars globally, higher prices lead to increased demand for the currency. Additionally, the dollar serves as a safe-haven asset during times of geopolitical tension.

The pound was particularly vulnerable to these pressures due to its status as a net energy importer. Britain's trade balance suffers when oil prices rise, causing more pounds to flow out and dollars to flow in. This dynamic further pressured sterling.