The pound slipped to $1.3474 on September 14, its weakest level since August 7, as a 3% jump in Brent crude drove demand for the dollar. The move came even after the UK posted stronger-than-expected GDP growth, with traders instead focused on oil-driven safe-haven flows and this week's Fed rate decision.
GBP/USD dropped 0.4% to $1.3474 on September 14, its lowest level against the dollar since August 7. Brent crude surged 3% to $108 a barrel, and the resulting scramble for dollar-denominated assets pulled the pound, the euro and the yen down together.
Oil and Fed bets drive the dollar
Two forces pushed the dollar higher. Houthi strikes on Saudi Arabia and the shutdown of a Saudi pipeline that bypasses the Strait of Hormuz revived fears of prolonged supply disruption in the region's oil corridor. At the same time, markets are pricing a 75% probability that the Federal Reserve will raise rates at its September 16 meeting, a move that would make dollar assets more attractive relative to sterling.
The European Central Bank has also raised its own borrowing costs recently, but that appears to have done little to slow the dollar's broader momentum.
Strong UK GDP wasn't enough
The pound's slide came despite a solid domestic data print. UK GDP grew 0.4% in July, beating expectations for flat output. Some analysts said the reading could give the Bank of England room for further monetary tightening. Currency markets, however, stayed focused on oil and the Fed rather than a single month of growth data.
Why oil hits the pound harder
Britain's status as a net energy importer means rising oil prices widen its trade deficit, since more sterling must be sold to buy foreign-currency energy. The US, by contrast, has become one of the world's largest oil producers, so higher crude prices barely dent its trade balance and can even help it. That asymmetry is why a Brent rally tends to widen the gap between the dollar and the pound rather than move both currencies equally.
The September 16 Fed decision is the next catalyst. A rate hike in line with market pricing could extend the dollar's rally and add further pressure on sterling, while the Houthi attacks and the Saudi pipeline shutdown remain unresolved risks to the oil market.
Source: Crypto Briefing
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