Sterling fell against a steadier dollar on Wednesday while the euro slid to its weakest level against the pound in 16 months. Firmer oil prices and a hawkish Federal Reserve dot plot kept the dollar supported, and France's deepening fiscal troubles added further pressure on the euro.
Sterling fell 0.59% to $1.31999, while the euro dropped 0.71% to $1.1180 against the dollar on Wednesday, as firmer oil prices steadied the greenback ahead of Federal Reserve minutes and French fiscal worries weighed on the single currency.
Fed minutes loom after hawkish dot plot
The Fed's September minutes are due later Wednesday, after a hawkish dot plot showed four members expecting two more rate hikes this year against two expecting none. According to Investing.com, "The scope for a dovish surprise appears limited," said Francesco Pesole, FX strategist at ING. Data has been softer since the September hike, but markets still firmly price a December move, setting a relatively high bar for a positive dollar reaction.
Brent briefly dipped below $100 a barrel on Tuesday before recovering on reports Iran had stepped up tanker strikes in the Strait of Hormuz, steadying the dollar further.
France's fiscal crisis drags on the euro
EUR/GBP slipped 0.13% to 0.8471, touching a low of 0.8448 — its weakest level since June 2025 and a break below the 2026 low set in July. Sterling rose against the euro for a ninth straight session, reaching a 16-month high and climbing 0.13% to 1.1806.
France faces a deepening bond crisis over missed deficit targets, policy gridlock and next year's presidential elections. Marine Le Pen on Tuesday urged the European Central Bank to intervene to curb debt costs, and Spanish Prime Minister Pedro Sánchez's call for snap elections added regional risk. Swaps now favor three quarter-point ECB hikes by September 2027, down from four early last week.
The euro welcomed a tighter French 10-year spread to bunds of 125 basis points, but the rebound faded on oil. ING expects the dollar index to stabilize around 102.0, with risks skewed higher, and sees EUR/USD risk at 1.1150-1.1180 near term, while giving no GBP target.
Source: Investing.com
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