Pound Plunges Below $1.35 as Oil-Driven Dollar Rally Continues
The British pound slipped below $1.35 on Monday as oil-driven dollar strength weighed on sterling, while the euro also fell against the US currency.
Rising oil prices and expectations of a hawkish Federal Reserve rate hike lifted the greenback broadly. The dollar index was up over 3% after Saudi Arabia shut its East-West pipeline following drone attacks from Iraq.
Francesco Pesole, FX Strategist at ING, said that they continue to favour a moderately stronger dollar from here and that a return to the 99.50-100 range in the dollar index 'remains a tangible possibility' due to Gulf supply risks alongside fresh AI-related pressure on equities.
The Fed is expected to hike rates by 22 basis points on Wednesday, with hotter-than-expected U.S. CPI having 'all but sealed' the move. The market is also watching for any signs of fiscal stimulus from the White House ahead of the midterms, which could trigger a rise in the USD risk premium.