Dollar Strength Continues as Sterling and Euro Fall

Sterling and the euro both took a hit on Wednesday as investors continued to price in a more hawkish Federal Reserve path. The dollar index is expected to grind higher, potentially reaching the 100.10/20 area, according to Chris Turner, Global Head of Markets and Regional Head of Research for UK & CEE at ING.

The Fed's hawkish tone has been reinforced by Chair Kevin Warsh's remarks last week, which shifted the market's baseline towards a September rate hike. The Beige Book release on Wednesday is expected to provide further clarity on the Fed's intentions, with traders awaiting the results of the upcoming FOMC meeting on September 16.

Turner noted that even weak labour market data may not be enough to stop the Fed from hiking rates, which would put additional pressure on sterling and the euro. The pound slipped to 1.3509, down 0.04%, while the euro fell to 1.1577, down 0.13%.

The dollar's strength is being driven by broad market trends rather than UK-specific fundamentals, according to ING's commentary. The broker sees the euro facing mounting headwinds, with higher energy prices and a more hawkish Fed pushing EUR/USD lower within recent ranges.