GBP/USD Slumps to Five-Week Low as Fed Hike Bets Lift Dollar

The British pound slid to its lowest level in five weeks against the US dollar as interest rate hike bets and higher yields lifted the greenback. The GBP/USD pair dropped to a low of 1.3464 before recovering some losses, but remained down 0.23% at 1.3492 due to the thin UK and US economic calendars.

Oil prices surged after attacks on Saudi Arabia's East-West pipeline damaged its capacity, forcing authorities to shut it down as a precaution. The US dollar index (DXY) rose 0.39% to 99.47, while the yield on the 10-year US Treasury note climbed above 5% for the first time since 2023.

The market is anticipating a Federal Reserve rate hike, with probabilities implying a move to 3.75%-4% from 3.50%-3.75%. Prime Terminal put the probability of a hike at 93%, versus 7% for no change. In contrast, the Bank of England is expected to maintain its Bank Rate at 3.75% after July GDP rose 0.3%.