Pound Slumps to Two-Month Low as US Rate Hike Expectations Rise

The Pound to US Dollar (GBP/USD) exchange rate fell to a two-month low last week due to increased expectations of higher interest rates from the Federal Reserve.

The latest data shows that GBP/USD is trading at around $1.3236, down roughly 1.2% from the start of last week's session.

US employment data and preliminary PMI figures have strengthened bets on another 25-basis-point hike at the Fed's October meeting, with the probability rising to around 70% from 50%.

Barclays notes that despite the USD being stronger overall, its sentiment index has only shifted from negative to neutral territory, suggesting there is still 'scope for further USD long positioning'.