Sterling traded lower against the dollar on Friday as a global equity sell-off hit risk appetite. ING's FX strategist says the dollar is not the preferred safe haven, while UK retail sales missed forecasts.
Sterling slipped 0.10% against the dollar to $1.3375 on Friday as of 05:28 ET (09:20 GMT). The euro fell more, dropping 0.21% to $1.1193. A global equity sell-off, driven by higher oil prices and AI-related concerns, weighed on both currencies.
Dollar fails to act as the preferred safe haven
The sell-off left the dollar far from the preferred safe haven, according to Francesco Pesole, FX strategist at ING. He said the yen and Swiss franc are the main beneficiaries of the defensive rotation.
Ten-year Treasury yields fell back below 5.0% for the first time in a month. The two-year SOFR swap rate dropped 15 basis points to 4.50%.
Equity jitters are enough to dent conviction on a Fed tightening cycle, Pesole said. Even so, he said that "the bar for pricing out a December Fed hike appears fairly high", which should limit larger dollar corrections.
UK retail sales miss forecasts
Sterling also faced domestic data. UK retail sales volumes fell 0.4% month-on-month in September, Office for National Statistics data showed, against a forecast 0.1% decline. August was revised up to a 0.7% rise, and annual growth slowed to 0.8% from 2.7%, below the expected 1%.
The data may have added modest pressure on the pound. However, sterling's smaller move than the euro's suggests the figures were not the main driver.
Euro trades on French bond risk
In Europe, the OAT-Bund 10-year spread closed at 174 basis points after touching 178 bp. France faces a Moody's credit review. Pesole said the euro's sensitivity to France has clearly diminished, but the link may re-establish very rapidly if a new pain level, perhaps 200 bp, is breached.
ING sees EUR/USD quick to re-test the 1.1120 14 October low should bond turmoil persist. It gave no timeframe or sterling targets.
Source: Investing.com
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