Pound Surges as Dollar Weakens Amid Prospective U.S. Rate Cuts

The British pound hit its highest level since March 2022, driven by the prospect of U.S. Federal Reserve rate cuts. Rising oil prices took a pause, helping other major currencies gain against the dollar. Investors are speculating on the extent of the Fed’s rate cuts at the upcoming September meeting.

The British pound soared to its highest level against the U.S. dollar in over two years this Tuesday. Other major currencies also rallied as a pause in rising oil prices helped investors move away from the greenback. The dollar's recent downturn is attributed to the prospect of imminent U.S. Federal Reserve rate cuts, slated for September.

Sterling experienced a 0.25% rise, reaching its strongest point since March 2022. The contrast between Federal Reserve Chair Jerome Powell's remarks, hinting at significant U.S. rate cuts, and the cautious tone of Bank of England Governor Andrew Bailey provided a buffer for the pound.

Meanwhile, the euro hovered near its 13-month high, while the Canadian dollar and Australian dollar also saw gains. The yen weakened, and the dollar index remained just above its one-year low. Investors now focus on how much the Fed will cut rates, with expectations already set for significant easing.

(With inputs from agencies.)