Sterling and Euro Plummet as Hawkish Fed Outlook Lifts Dollar

The sterling and euro have fallen against the dollar as markets absorb a more hawkish Federal Reserve outlook following Chair Kevin Warsh's recent remarks.

A stronger dollar has been fueled by expectations of a September rate hike, with inflation seen as not falling quickly enough to target despite a 'reasonably strong' economy, according to ING.

The Fed's shift in stance has weighed heavily on the sterling and euro, with sterling down 0.04% at 1.3509 and the euro down 0.13% at 1.1577 as of 03:52 ET (07:52 GMT).

ING's Global Head of Markets and Regional Head of Research for UK & CEE, Chris Turner, said that even weak labour market data may not be enough to stop the Fed from hiking, with the dollar index potentially grinding higher to the 100.10/20 area.