Sterling Slides as Fed Hike Bets and UK Inflation Weigh on Pound

The pound slid lower on Wednesday due to expectations of a Federal Reserve rate hike and rising UK inflation.

Investors are anticipating a 25 basis point increase to 4% later in the day, with markets pricing in 23bp for the meeting, 52bp by year-end, and 89bp by June.

FX strategist Francesco Pesole at ING noted that 'a dovish hike may not be enough to convey monetary policy discipline' and added that 'any openness to further tightening can support the dollar by reinforcing policy credibility.'

The euro showed resilience, partly due to a diverging dollar narrative rather than eurozone strength. ING targets a EUR/USD test of 1.150 as soon as this week, potentially triggered by Wednesday's Fed announcement.