Pound Hits One-Month Lows as Oil Prices Soar

The pound has hit its lowest level in over a month against the dollar due to high oil prices and expectations of an interest rate hike by the Federal Reserve. The sterling-euro exchange rate eased 0.2% to $1.347, hovering near its lowest since August 7. Oil prices rose more than 2% to $108.2 per barrel after Iran-backed Houthi forces in Yemen launched attacks on Saudi Arabia and Gulf Arab states postponed discussions with Iran.

The spike in oil prices has led to concerns of energy-related inflation, prompting investors to expect higher interest rates. The Bank of England is expected to keep rates steady this week but traders are fully pricing in one 25 basis point rate hike and a high chance of another by year-end. Britain's jobs market remains weak with pay growth near a six-year low.

Felix Feather, an economist at Aberdeen, said markets have moved to price aggressive hiking due to the softness of the labor market. The Bank of England may also announce that it will stop selling long-dated government bonds, potentially freeing up some cash for finance minister John Healey.