Sterling treads water at 3-month low after weekly drop on dollar rally
EWU•Sterling held near a three-month low against the dollar and euro, with the pound on track for a 1.2% weekly drop against the dollar. Traders raised bets on further U.S. rate hikes as energy prices rose.
1. Pound near three-month low
Sterling was little changed at $1.322 on Friday after falling to $1.32 on Thursday, its lowest since June 29. It was on track for a 1.2% weekly decline against the dollar, its biggest one-week drop since May, after falling 1% the previous week.
2. Rate expectations weigh
The dollar rallied as traders raised their bets on further Federal Reserve rate hikes, with rising energy prices and strong economic growth prompting Fed officials to discuss the possibility of more increases. The Bank of England held rates steady last week, while flagging possible increases if the conflict in the Middle East drags on. Sterling also eased against the euro, which reached 86.11 pence.
3. BoE outlook in focus
ING currency strategist Francesco Pesole said the pound is likely to struggle in coming months, saying it is doubtful the BoE will sharply raise rates. Money markets expect around 35 basis points of BoE tightening this year and more than 100 basis points by the end of 2027, while economists broadly expect more limited action.
