Pound, euro drop as dollar bid weighs
GBP/USD declined 0.07% to $1.3343 and EUR/USD slid 0.08% to $1.1403
Pound dropped on Wednesday, while the euro also eased, with investors also positioning for potentially hawkish minutes from the U.S. central bank due later in the day.
GBP/USD declined 0.07% to $1.3343 and EUR/USD slid 0.08% to $1.1403, with Brent crude up close to 6% near $79 a barrel.
The currency has been supported by rising Bank of England rate-hike bets, markets now fully price a 25bp hike by year-end, up from 75% probability amid oil-driven inflation concerns.
For the euro, ECB speakers Nagel, Dolenc, Kocher and Moulin are due Wednesday, though ING expects likely limited market impact.
Marine Le Pen’s confirmation that she will contest France’s 2027 presidential election drew a muted market reaction, with 10-year OAT-Bund spreads holding near 80bp.
This court decision doesn’t change much for the euro considering markets are likely to be already pricing in an RN win in April, said Francesco Pesole, FX strategist at ING., adding downside risks remain for EUR/USD, with a move below 1.140 still quite possible this week.
ING is not embedding a French political premium into its EUR forecasts for now but says risks stay tilted lower near-term.
Equity jitters offered the dollar some support yesterday – a reminder of the greenback’s very strong safe-haven appeal, said Francesco Pesole.
The importance of the Fed’s hawkish shift in June for the dollar cannot be overstated, Pesole said. Market conviction around further tightening relies heavily on the median dot plot signalling a hike and on new Fed Governor Kevin Warsh reaffirming a strong commitment to the inflation mandate.
The central bank publishes minutes from its June meeting later today, which ING expects to cement the hawkish message and firm up dollar momentum, though not enough to force a break higher, with futures pricing just 35 basis points of cuts by December after a soft jobs report. Pesole sees the dollar index mostly rangebound near-term, with upside risk to 101.50-102.0.