Sterling, euro drop amid softer oil backdrop

GBP/USD declined 0.15%, to 1.3462, while EUR/USD slipped 0.03%, to 1.1526

Sterling fell on Monday while the euro also slipped amid a softer oil backdrop.

As of 07:55 GMT, GBP/USD declined 0.15%, to 1.3462, while EUR/USD slipped 0.03%, to 1.1526.

Sterling’s decline was not driven by UK-specific fundamentals. There were no significant domestic policy or political catalysts on Monday, and the pound tracked dollar-side dynamics almost entirely.

ING’s DXY dollar index view, support near 99.35/40, a potential break back above 100 this week, would put further mild pressure on cable if realised, though the move is unlikely to be sharp absent a data surprise.

EUR/USD’s underperformance relative to what ING described as a favourable backdrop, solid eurozone hard data last week, lower oil, heavy dollar selling from Japan, may partly reflect U.S. Treasury activity in EUR/JPY.

ING’s Turner suggested Washington may have sold the cross to avoid having to explain to the US public why it was selling the dollar, drawing on the nearly $13 billion in euro-denominated FX reserves held by the Exchange Stabilisation Fund, a sum he called “barely a drop in the ocean” relative to global flows.

ING’s strategic pivot point for EUR/USD sits at 1.1615/20 on the upside and 1.15 below; the Fed’s September decision will determine which level yields first.

Elsewhere, the dollar’s ability to hold its ground surprised some traders after U.S. and Japanese authorities confirmed coordinated selling of dollars to support the yen, with Tokyo estimated to have offloaded $70-80 billion over the past three days.

In theory, the dollar should be broadly weaker today, said Chris Turner, global head of markets at ING, citing the intervention and lower oil prices following reports that U.S. President Donald Trump prefers negotiation over military action with Iran. The case for a sustained sell-off in the dollar has yet to be made, he added.