Geopolitical risks in the Strait of Hormuz lift oil prices and Fed rate hike bets, weighing on the British Pound against the US Dollar.
The British Pound fell against the US Dollar on Tuesday, with GBP/USD down 0.11% to 1.3373, as attacks on ships in the Strait of Hormuz stoked geopolitical tensions. The incidents, involving the Islamic Revolutionary Guard Corps, drove oil prices higher, raising concerns over inflation and potential Federal Reserve rate hikes.
The US Dollar Index (DXY) edged up 0.05% to 100.93, supported by safe-haven demand. US trade data showed the deficit widened to $77.6 billion in May, exceeding April’s $54.6 billion, as imports rose and exports declined. Meanwhile, consumer inflation expectations climbed to 3.7% in June from 3.5% in May, according to the New York Fed.
Money markets now price a 60.42% chance of a Fed rate hike in September, while odds for unchanged rates in July stand at nearly 75%.