Sterling edged higher against the dollar on Monday while the euro slipped. Expectations of further Federal Reserve tightening and geopolitical tension kept the dollar well supported, with US consumer price data due Wednesday.
Sterling traded slightly higher on Monday while the euro slipped, as expectations of further Federal Reserve tightening and geopolitical tension kept the dollar well supported. Weekend news of continued Houthi strikes on Riyadh and a proposed energy ceasefire between Russia and Ukraine had little impact on currencies.
GBP/USD rose 0.08% to 1.3243, while EUR/USD fell 0.07% to 1.1194, as of 04:37 ET (08:37 GMT).
ING sees a hawkish dollar outlook
Chris Turner, global head of markets at ING, said FX markets are focusing on the cyclical story of decent US growth, above-target inflation and the prospect of the Fed hiking 75bp from current levels. Turner said the dollar index's "consolidation above 102 looks bullish".
Attention now turns to Wednesday's US September consumer price data. ING sees upside risks to the 0.2% month-on-month consensus for core inflation, which Turner said would keep Fed tightening expectations broadly intact.
ING said it may not be until next spring that those expectations drop out of money markets.
French budget worries weigh on the euro
The euro stayed under pressure from French fiscal worries. French debt spreads are near their widest, and the government's 43 billion euro savings plan is due for debate in parliament this week.
Turner said consensus expects little progress, but the government may ultimately pass the budget by decree. Markets price 22 basis points of European Central Bank hikes in December, while ING expects 25 bp.
ING's near-term targets are 102.85 on the dollar index and 1.1100/1120 on EUR/USD. A sharp fall in energy prices, which ING considers unlikely this week, would also undercut the case for further Fed tightening.
Source: Investing.com
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