Investing.com — Sterling traded slightly higher on Friday while the euro also firmed, as the dollar lost ground when Treasuries took a breather.
Sterling rose 0.08% to $1.3242, while the euro gained 0.10% to $1.1222 against the dollar, as of 05:45 ET (09:45 GMT).
The greenback’s slip looks limited. “The dollar lost a bit of ground yesterday as Treasuries took a breather, but we don’t see signs of a broader USD correction brewing,” said Francesco Pesole, FX strategist at ING.
Pesole added that “global bonds and risk sentiment (are) still looking fragile” and that ING retains “a preference for a slightly stronger dollar in the near term.”
Oil remains above $100 a barrel, with the market reluctant to price out a geopolitical premium even after U.S. President Donald Trump said the United States would not attack Iran before the Nov. 3 midterms, ING noted.
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Fed policymakers Alberto Musalem and Christopher Waller both reiterated on Thursday the need to raise rates further, hawkish signals that ING said keep markets “convinced of a December hike.” Susan Collins is the only Fed speaker scheduled today, and ING gave no indication of her stance.
The University of Michigan surveys are the main U.S. data event, with inflation expectations seen ticking higher and sentiment edging lower.
The pound’s gain appears driven by the dollar side, not UK fundamentals. ING’s note cited no UK data, Bank of England comment or domestic political development, and none were provided for this report. ING did note that the euro “isn’t showing any signs of recovery” against sterling, the Swiss franc and the Swedish krona.
EUR/USD has returned above 1.120 on dollar softness, but Pesole said that is not a sign of euro strength. “It’s a sign that FX markets aren’t ready to scale back the French fiscal premium,” he said.
The 10-year OAT-Bund spread closed at 140 basis points on Thursday, and ING does not think Marine Le Pen’s fiscal tightening promise is enough to turn the tide for French bonds. The source contained no ECB commentary.
“We still think 1.110/1.112 can be tested in the near term,” Pesole said of EUR/USD. ING offered no sterling target. Its dollar-bullish stance would be challenged by a stabilisation in global bonds and risk sentiment, or a softening of the hawkish Fed narrative. A narrowing of the French premium would be needed for the euro to recover.
Original Article
Sterling today: Pound edges up as dollar dips on Treasury pause
Euro limps Toward 5th weekly loss as dollar pause fails to erase rate hike bets
French yields pause near peak as markets fret over Paris’s record debt load
