FX.co ★ Sterling Weakens Amid Dollar Strength

Sterling extended its decline toward the $1.33 level, holding at its weakest point since late October, as the US dollar continued to gain support from expectations of further Federal Reserve tightening in December. The recent slide in oil prices also stalled, with Brent crude stabilizing after shipping attacks in the Strait of Hormuz. At the same time, stronger-than-expected US inflation data reinforced expectations of another Fed rate increase in December and raised the possibility of a larger 50bp move. Even so, bets on further monetary tightening by the Bank of England helped limit sterling’s losses. Deputy Governor Clare Lombardelli warned that back-to-back rate hikes remained on the table, citing persistent wage pressures and the risk of second-round inflation effects. Markets are increasingly pricing in another rate increase before year-end, followed by an additional hike by March. Investors now turn their focus to the UK’s third-quarter GDP report due on Thursday.