The Pound to Dollar exchange rate slipped from 20-day highs near 1.3400 as renewed Middle East tensions pushed investors back into the US Dollar. Sterling held relatively firm, with traders favouring the Pound on improving UK sentiment while awaiting the Federal Reserve’s June meeting minutes.
The Pound to Dollar exchange rate (slipped below 1.3350) after hitting 20-day highs at 1.3400 on Tuesday, though selling stayed limited. The Dollar drew support as risk appetite faded on fresh fears around Middle East developments, while lower equities curbed potential Pound support.
Even as the Pound retreated, markets kept favouring it on improving UK sentiment. Rabobank’s Jane Foley noted the Dollar had reacted to Trump’s remarks but that traders were treating them cautiously: “the market has learnt to take Trump’s comments with a pinch of salt.”
Immediate support sits just above 1.3300. UoB warned that a breach of 1.3315 would signal the advance in the Pound had come to an end. Scotiabank stayed more constructive, pointing to recovering UK-US spreads as fundamental support for the currency.
Scotiabank sees the recovery stalling around 1.34, with resistance from both the 50 and 200 day moving averages, yet remains bullish and looks for gains toward 1.36. Minutes from June’s Federal Reserve meeting are due on Wednesday, and ING expects them to cement a hawkish message that firms up Dollar momentum.
The rate path stays contested. Danske Bank keeps its base case that the Fed holds in July but hikes twice later, in December and March. MUFG is less positive on the Dollar, arguing next week’s CPI data should show the start of disinflation and could turn sentiment quickly if the print comes in softer.
Source: CurrencyNews.co.uk
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