Sterling Struggles Amid Fresh Energy Price Spike
The Pound to Dollar exchange rate remained under pressure on Tuesday as renewed global inflation concerns softened market risk sentiment. The GBP/USD rate drifted lower, trading at around $1.3526, slightly lower than its opening levels.
The US Dollar firmed up after a fresh surge in energy prices revived concerns over global inflation and boosted demand for the safe-haven 'greenback'. Brent crude approached the $100-per-barrel mark on Tuesday morning following targeted strikes against Saudi energy facilities.
Markets fear that a fresh energy price shock will quickly feed through into higher consumer and producer prices, pushing central banks to tighten monetary policy to counter inflationary pressures. However, the US Dollar's upside potential remained limited amid some caution ahead of this week's US inflation data, which will set expectations for whether the Federal Reserve will hike interest rates next week.
The fresh spike in crude oil also dampened appetite for the Pound as it pushed UK gilt yields higher. Government borrowing costs rose, with yields on the UK benchmark 10-year gilt rising around 0.3%, propelling yields just shy of multi-year highs struck during last week's bond market turmoil.