Sterling falls to one-month low as oil prices boost dollar

The British pound slipped to $1.3474 on September 14, its lowest point against the US dollar since August 7. That 0.4% single-day drop tells a story that has less to do with the UK economy and more to do with oil, geopolitics, and the gravitational pull of the greenback when markets get nervous. Brent crude surged 3% to $108 per barrel, driven by a cocktail of supply-side fears that sent traders scrambling for the safety of dollar-denominated assets. The pound, along with the euro and the yen, got caught in the undertow. What’s driving the dollar rally Two forces converged to give the greenback its strongest footing in weeks. The first is energy. Houthi strikes on Saudi Arabia and the shutdown of a critical Saudi pipeline that bypasses the Strait of Hormuz reignited fears of prolonged supply disruptions in the world’s most important oil corridor. The second force is monetary policy expectations. Markets are pricing in a 75% probability that the Federal Reserve will hike interest rates at its September 16 meeting. Higher US rates make dollar-denominated assets more attractive relative to sterling-denominated ones, which mechanically pulls capital toward the greenback. The European C...