Pound Rises Against Dollar Despite Greenback Rebound

The pound rose against the dollar on Tuesday despite a rebound in the greenback. The GBP/USD exchange rate increased to 1.3440, up 0.07% from the previous day, while the EUR/USD traded at 1.1509, up just 0.01%. According to ING strategist Francesco Pesole, the dollar's steadier tone is due to two factors: the easing of concerns over Japanese yen intervention and stronger-than-expected US manufacturing data that tempered expectations for near-term Federal Reserve interest rate cuts.

Pesole noted that the positioning picture for the dollar is more balanced now compared to a week ago. Net-long dollar bets had stood at almost 26% of open interest on the day of July's Fed meeting, the most overbought reading since May 2019. However, last week's unwind has normalized speculative positioning.

Markets currently price a September Fed rate hike at 65%. Neither the ISM beat nor payroll consensus points toward the dovish repricing that would be needed to justify fresh dollar selling. Sterling's steadiness owes little to UK-specific drivers, with no major domestic political or policy catalyst visible in today's session.