The pound dropped below $1.35 on Monday, weighed down by a dollar rally fueled by rising oil prices and expectations of a Federal Reserve rate increase.
GBP/USD traded at 1.3482 as of 04:25 ET, down 0.33% on the day and 0.38% for the week. The decline was not tied to UK-specific developments — no domestic data or Bank of England commentary drove the move, with sterling instead tracking broader euro weakness and dollar strength.
The euro fared worse. EUR/USD fell 0.55% to 1.1535, breaking below the 1.1600 level that held last week. ING sets a near-term target for the pair at 1.1500.
Oil prices provided the main catalyst for the dollar's advance. Brent crude rose more than 3% on the session after Saudi Arabia shut its East-West pipeline following drone attacks traced to Iraq. The supply disruption reinforced expectations that the Federal Reserve would move aggressively on monetary policy.
Markets are pricing in a near-unanimous 22-basis-point rate hike at Wednesday's meeting, a outlook that ING said was all but sealed by hotter-than-expected U.S. consumer price data released last week.
Looking ahead, ING projects the dollar index could return to the 99.50–100 range. ECB officials — President Christine Lagarde, Isabel Schnabel and Piero Cipollone — were set to speak at a meeting in Vienna, while Germany's ZEW survey also loomed as a near-term data point for the euro.
With U.S. inflation data already signaling persistence, the Fed's Wednesday decision is expected to further bolster the dollar across major currency pairs.
