Pound Weakens as Oil Fears Intensify Ahead of Fed Decision

The US dollar strengthened on Tuesday as investors sought safe-havens due to concerns over oil supply, causing the British pound to slip by about 0.07%. The GBP/USD traded at 1.3487 after reaching a high of 1.3505. Oil prices surged with Brent up 2.40% and WTI up 1.10%, which led to an increase in the US 10-year Treasury yield to 5.041%, a level not seen since 2007.

The Federal Reserve is expected to raise interest rates by 25 basis points on Wednesday, with implied odds at 95%. In contrast, markets expect the Bank of England to keep rates unchanged on Thursday. The UK's labour market showed softer indicators, including vacancies at a near six-year low and regular pay rising 3.5% in the three months to July.

Traders are focusing on central banks and data, with derivative traders targeting the weakening pound by purchasing short-term GBP/USD put options. Historically, when the US dollar index climbs towards the 100 mark, similar to the current 99.62 level, the Sterling faces intense downward pressure.