Sterling Takes Another Hit as Dollar Strength Fuels Rate Hike Expectations
The pound has fallen for the third day in a row due to the dollar's strength. Sterling is currently trading at around $1.328, down 0.45% on the day. The weakness of the pound comes as investors expect a series of US interest rate hikes over the coming months, even though oil prices are below $100 a barrel.
A survey by S&P Global showed that British business activity cooled in September, with the UK Services Purchasing Managers' Index (PMI) falling to 51.7 from 52.5 in August. This is a three-month low, and comes as inflation pressure builds. Finance minister John Healey faces an awkward backdrop ahead of his first budget in October.
Money markets suggest that UK interest rates will be around 4.75% this time next year, implying four quarter-point hikes between now and then. Traders assign a 65% chance of a rate rise at the Bank of England's November meeting, which falls right after the Autumn Budget.