Investing.com — Sterling traded modestly higher on Tuesday while the euro clawed back some ground near its 52-week low, as a supported dollar, underpinned by rising global bond yields, limited gains in both currencies.
Sterling was up 0.08% against the dollar at $1.3229, as of 04:15 ET (08:15 GMT), while the euro was up 0.06% at $1.1229.
“The dollar has continued to find support at the start of this week,” said Francesco Pesole, FX strategist at ING, citing the euro’s “idiosyncratic weakness” and global bond yields “that keep pushing higher.”
Strong equities likely capped dollar gains, he said, though the domestic backdrop “remains constructive for the greenback.”
U.S. ISM services eased to 54.9 in September from 55.4, versus a 55.0 consensus, but stayed firmly in expansion territory. Pesole called it “slightly hawkish news if anything (especially on jobs and prices), but not enough to materially alter the Fed narrative.”
ING sees markets comfortable with an October hold if September core CPI, due Oct 14, prints at 0.2% month-on-month, with a December hike its base case.
Fed speakers Williams, Musalem, Bowman and Schmid are due today alongside trade data and ADP payrolls, while Wednesday’s FOMC minutes may have a “relatively contained” impact.
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September construction PMI is the main domestic release for the UK today, but attention is focused on the Bank of England, where Catherine Mann, who voted for hikes in July and September, is due to speak.
Megan Greene and Huw Pill, who also backed hikes, are due to speak on Thursday alongside Andrew Bailey and Clare Lombardelli, the neutral members seen as the likeliest swing votes in November.
Markets price in 21 basis points of tightening next month, 36 bps by year-end and 89 bps by June, a curve ING considers “far too hawkishly priced.” Pesole said “translating that into a EUR/GBP rally remains challenging” given elevated oil prices.
The euro “started the week at the bottom of the G10 scorecard,” Pesole said, as French bond turbulence added a fiscal risk premium and pared ECB rate-hike expectations. March pricing has fallen to 45bp from 80bp on Sept 24, pushing the two-year EUR/USD swap differential to -167bp, the widest since August 2025.
EUR/USD recovered to just above 1.120 on Monday after dipping to 1.1160, but “we don’t have much confidence in a sustained rebound,” he said.
