Sterling Slides Amid Oil-Driven Dollar Rally

The British pound fell below $1.35 against the US dollar on Monday as oil prices surged and investors anticipated a hawkish Federal Reserve rate hike.

The euro also dropped, breaking below its previous level of $1.1600, to trade at $1.1535, down 0.55% from Friday's close.

FX Strategist Francesco Pesole at ING attributed the dollar's strength to rising oil prices and expectations of a Federal Reserve rate hike, saying 'we continue to favour a moderately stronger dollar from here.'

Pesole noted that a near-unanimous 22bp Fed hike on Wednesday is priced in, with hotter-than-expected US CPI data having sealed the move. He also flagged that the Fed may retain a hawkish tone due to bond market demand for policy credibility and recent rise in energy prices.