Dollar Surges as Hawkish Fed Talk Crushes Sterling
Sterling took a hit on Tuesday as hawkish comments from Federal Reserve officials lifted the dollar across G10 currencies. The pound fell to $1.3354, down 0.10% on the day, while the euro eased to $1.1454, down 0.11%. Chicago Fed President Austan Goolsbee warned that supply shocks combined with strong spending and AI-related investment 'could keep inflation persistent', while St. Louis Fed President Alberto Musalem argued for front-loaded gradual tightening.
ING's Francesco Pesole noted that hawkish Fed commentary was the clearest driver of dollar strength, supporting front-end USD rates even as oil briefly slipped below $100/bbl. Markets are now looking to dovish-leaning Fed voices John Williams and Philip Jefferson, alongside neutral non-voter Tom Barkin, all due to speak on Tuesday.
The Bank of England is still expected to hike interest rates in November, with markets pricing in about a 75% chance of a rate increase. However, ING economists remain bearish on the pound, expecting no hike and maintaining a bearish GBP outlook.