Sterling today: Pound slips as dollar resilience builds on hawkish Fed bets
Sterling traded lower on Wednesday while the euro also fell, as broad dollar strength persisted despite softer oil prices and hawkish Federal Reserve commentary kept the greenback in demand.
GBP/USD fell to 1.3292, down 0.40%, while EUR/USD dropped to 1.1414, down 0.31%, as of 05:26 ET (09:26 GMT).
“The dollar continues to show very good resilience to lower energy prices and a risk-friendly environment,” said Francesco Pesole, FX strategist at ING.
“It’s another sign that the Fed story is dominant, and the hawkish Fedspeak is enough to keep USD in demand.” ING said DXY reaching 101 “remains a very achievable near-term target” over the coming weeks.
Richmond Fed President Thomas Barkin, a voter in 2027, struck a hawkish tone this week, arguing a single rate hike may not be enough to tame inflation and that resilient labour market conditions should keep consumer spending supported.
High-frequency jobs data have reinforced that view: initial jobless claims are back below 200,000 and ADP reported a pickup in hiring in early September. Consensus is building around a strong September payrolls print of 80,000-100,000.
Markets are now watching Wednesday’s S&P Global PMIs, though these carry less weight than the ISM surveys, with a fuller data slate expected to firm up October rate-hike bets.
Wednesday’s move in sterling was not driven by UK-specific fundamentals, no significant domestic data or Bank of England commentary featured in the session, with the pound’s decline tracking broader dollar strength rather than any shift in UK rate expectations.
For the euro, ING said EUR/USD “is starting to look a tad cheap” given support from global equities, but sees “little technical justification for fading the current decline before 1.140-1.142,” a level that would breach a 1.5 standard-deviation misvaluation band assuming unchanged rate differentials.
Pesole flagged that falling oil prices pose a fresh risk: “when oil prices fall, markets may price out ECB tightening faster than Fed tightening,” a dynamic that dragged on EUR/USD in June. ING still expects both the Fed and ECB to hold their next moves until December but sees the Fed as more likely to move early, leaving “the balance of risks skewed to the downside for EUR/USD.”
Eurozone composite PMI surprised to the upside, rising to 53.1 in September from 52.0 in August, its highest level in three years, defying expectations for a slight softening.
The gain was driven mainly by services, which jumped to 53.0 from 51.6, with Germany’s services reading climbing to 52.9 from 49.7.
Manufacturing held up across the eurozone as a whole, though France’s factory PMI slipped close to the 50 threshold. “Today’s PMI readings make it more difficult for even the ECB’s most dovish policymakers to rule out another rate hike,” ING said, while cautioning that input and output prices rose at their fastest pace in four months.
ING’s near-term dollar target is DXY at 101.0, with EUR/USD downside risk toward the 1.140-1.142 zone. A shift would require either clearer signs of US labour-market softening that erode Fed hike bets, or a more hawkish ECB tone from Thursday’s busy speaker calendar.
