Pound Plummets on Warsh's Rate-Hike Hint

The British pound plummeted against the US dollar on Monday following comments from Federal Reserve Governor Kevin Warsh, reigniting speculation that the US central bank may resume interest rate hikes. This hawkish signal has strengthened the greenback and put pressure on sterling.

Sterling fell as much as 0.8% against the dollar in early London trading, reaching a session low of $1.2634 before recovering slightly to trade around $1.2660. The move marked the pound's sharpest one-day decline in three weeks, with investors repricing the likelihood of further Fed tightening.

Warsh's remarks at a monetary policy forum in New York emphasized that 'the resilience of the US economy and sticky inflation in services warrant keeping all options on the table, including further rate increases.' His comments prompted traders to increase bets on a quarter-point hike at the Fed's June meeting, with CME Group's FedWatch tool showing the probability of a June hike jumped to 38% from 24% a day earlier.