Pound Sinks as Dollar Gains Amid Rising Energy Prices and Rate Hike Expectations

The British pound, also known as sterling, has been hovering near its three-month low against the US dollar and euro. The currency's value has been affected by rising energy prices and growing expectations of further interest-rate increases in the United States.

According to recent market trends, the US dollar has gained ground this week, with traders increasing their bets that the Federal Reserve could continue raising interest rates. Higher energy prices, linked to the conflict in the Middle East, have prompted Federal Reserve officials to signal the possibility of additional rate increases after the central bank raised borrowing costs on Wednesday.

The Bank of England left interest rates unchanged last week, but indicated that further rate increases could be necessary if the US-Israeli conflict with Iran persists. Sterling has been on track for a weekly decline, losing about 1.2% against the dollar this week, its sharpest weekly decline since May.

FX strategist Francesco Pesole at ING expressed doubts over the Bank of England's ability to deliver aggressive rate increases, stating that it seems unlikely that the central bank will match market expectations for further tightening.