Investing.com — Sterling fell on Wednesday, while the euro also eased, as the dollar drew broad safe-haven demand after fresh U.S. strikes on Iran and jitters in equity markets, with investors also positioning for potentially hawkish minutes from the Federal Reserve due later in the day.
fell 0.07% to $1.3343 and slipped 0.08% to $1.1403, with up close to 6% near $79 a barrel after Washington’s action against Tehran as of 06:15 ET (10:15 GMT).
“Equity jitters offered the dollar some support yesterday – a reminder of the greenback’s very strong safe-haven appeal,” said Francesco Pesole, FX strategist at ING.
“The importance of the Fed’s hawkish shift in June for the dollar cannot be overstated.” Pesole said market conviction around further tightening “relies heavily on the median dot plot signalling a hike” and on new Fed Governor Kevin Warsh “reaffirming a strong commitment to the inflation mandate.”
The Fed publishes minutes from its June meeting later today, which ING expects to cement the hawkish message and firm up dollar momentum, though not enough to force a break higher, with futures pricing just 35 basis points of cuts by December after a soft jobs report. Pesole sees the mostly rangebound near-term, with upside risk to 101.50-102.0.
Sterling has been supported by rising Bank of England rate-hike bets, markets now fully price a 25bp hike by year-end, up from 75% probability – as oil-driven inflation concerns build following President Trump’s declaration in Ankara that “as far as I’m concerned, it’s over” regarding the Iran ceasefire.
For the euro, ECB speakers Nagel, Dolenc, Kocher and Moulin are due Wednesday, though ING expects “likely limited market impact.”
Marine Le Pen’s confirmation that she will contest France’s 2027 presidential election drew a muted market reaction, with 10-year OAT-Bund spreads holding near 80bp.
“This court decision doesn’t change much for the euro considering markets are likely to be already pricing in an RN win in April,” Pesole said, adding downside risks remain for EUR/USD, “with a move below 1.140 still quite possible this week.”
ING is not embedding a French political premium into its EUR forecasts for now but says risks stay tilted lower near-term. A shift toward a softer dollar view would likely require weaker-than-expected U.S. data or a dovish surprise in Wednesday’s Fed minutes, an outcome ING currently sees as unlikely.