The British pound has weakened against the U.S. dollar, with GBP/USD down 0.33% at 1.3500. The pound's decline comes amid growing expectations of Bank of England rate hikes, with markets pricing in at least two hikes by March next year. The pound previously strengthened to its highest level since Aug. 29.
The European Central Bank (ECB) raised all three benchmark rates by 25 basis points, taking the deposit rate to 2.50%. The euro has also weakened against the dollar, with EUR/USD lower by 0.25% at 1.1601.
Brent crude has surged above $105 a barrel, with Brent Oil Futures noted at 103.19. The U.S. Producer-Price Inflation (PPI) data showed final-demand PPI rose 0.4% month-on-month in August, with the annual rate accelerating to 5.4%. Energy accounted for more than three-quarters of the monthly increase in goods prices, with diesel fuel jumping 24.1%.
ING FX strategist Francesco Pesole noted that the U.S. Treasury's announcement of a $6 billion long-term bond buyback could help the dollar respond more efficiently to external drivers like higher oil prices and weaker equities. However, Pesole stated that the market was unlikely to abandon the dollar 'debasement narrative' just yet.
The pound's decline comes ahead of next week's Federal Open Market Committee (FOMC) meeting. The conflict in the Middle East has also impacted energy supplies, contributing to the surge in oil prices.
