Dollar Rally Pushes Pound Towards Lowest Close Since June
The Pound Sterling has declined by 0.15% to 1.3222 as of 08:33 ET (12:33 GMT) and is on track for its lowest close since June 26. The decline comes amidst a strong dollar rally, which has pushed the dollar index above 101.0.
According to ING's FX strategist Francesco Pesole, the dollar rally has accelerated and may have overshot. He expects 'a correction in DXY in the coming weeks, with a return to the 100-100.5 area' if there are no further data surprises.
The strong dollar is being driven by stronger-than-expected U.S. business activity data on Wednesday, which has stoked bets that the Federal Reserve will keep rates elevated for longer. Four Fed officials, including Williams and Barkin, are due to speak Thursday, and markets will look for signals on whether an October hike is live.
Pesole notes that any upside surprise in upcoming US data releases can easily prompt markets to fully price in an October Fed hike. This keeps ING cautious about calling a dollar top, but they do expect the dollar to correct.