Sterling slipped to 1.3631 against the dollar on Monday, down 0.10%, as traders waited on new U.S. Iran sanctions and a fresh U.S.-Canada trade flare-up. ING says the dollar selloff still has room to run, with the bigger test arriving from this week's Fed speeches and inflation data.
Sterling eased against the dollar on Monday, with GBP/USD trading at 1.3631, down 0.10% as of 04:40 ET. The euro moved in step, with EUR/USD at 1.1665, also down 0.10%. Neither move traced back to domestic news — ING's commentary tied the weakness to U.S. policy dynamics rather than UK data or Bank of England action.
Dollar policy jitters drive the move
The dollar clung near recent lows as markets braced for Treasury Secretary Scott Bessent's expected announcement of new Iran sanctions later Monday, alongside a fresh flare-up in the U.S.-Canada trade war. According to Chris Turner, ING's Global Head of Markets: "There may still be room for further USD long-squeezing", and the bank remains reluctant to call the bottom of the selloff. Turner added that any major tariff re-escalation would likely prove dollar-negative.
Attention now turns to Wednesday's core PCE inflation reading for July and Friday's keynote from Fed's Kevin Warsh at the Jackson Hole symposium. Turner described the risk from Warsh as skewed hawkish, noting his July press conference had already triggered a selloff at the long end of the Treasury market. ING expects the dollar index to consolidate in a 98.50-99 range Monday, with greater risk to the downside.
Euro positioning stays cautious ahead of IFO
On the euro, ING pointed to Chicago futures positioning data showing asset managers and leveraged funds building euro-long contracts, a sign speculators remain underweight the single currency. Germany's August IFO survey, due Tuesday, is expected to extend the recovery seen in Eurozone PMIs after sharp drops in March and April.
Turner said ING sees no need for EUR/USD to fall sharply below support at 1.1660/70 on Monday, though last week's break-out area would be at risk if risk assets started to suffer. ING's current forecasts put EUR/USD at 1.17 by end-September and 1.18 by year-end, though the bank will review those targets this week. A shift lower would likely require either a hawkish surprise from Warsh on Friday or a sharper deterioration in risk sentiment tied to the Iran sanctions and the U.S.-Canada trade dispute.
Source: Investing.com
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