Investing.com — Sterling slipped on Monday while the euro also eased, as the dollar clung to recent lows amid market anticipation of fresh U.S. policy signals from Washington, including new Iran sanctions and a possible fiscal consolidation plan.
was last at 1.3631, down 0.10% as of 04:40 ET (08:40 GMT), while stood at 1.1665, down 0.10%.
“There may still be room for further USD long-squeezing, and we remain reluctant to call the bottom in this dollar selloff just yet,” said Chris Turner, Global Head of Markets and Regional Head of Research for UK & CEE at ING.
Turner said Treasury Secretary Scott Bessent’s expected announcement of new Iran sanctions later Monday, alongside a fresh flare-up in the U.S.-Canada trade war, could test market appetite for a return of the “debasement” trade, with any major tariff re-escalation seen as dollar-negative.
On the U.S. data and Fed front, attention is turning to Wednesday’s core PCE inflation reading for July and Friday’s keynote speech from Fed’s Kevin Warsh at the Jackson Hole symposium.
Turner described the risk from Warsh as skewed hawkish, noting his July press conference had already triggered a selloff at the long end of the Treasury market.
“He will have to double-down on the Fed’s inflation-fighting credentials,” Turner said, adding Warsh is unlikely to signal much on next month’s policy path. ING sees the dollar index consolidating in a 98.50-99 range Monday, with greater risk to the downside.
Monday’s sterling move was not driven by UK-specific fundamentals; ING’s commentary attributed the broader dollar weakness to U.S. policy dynamics rather than domestic developments, with no UK data or Bank of England catalysts cited for the session.
On the euro, ING pointed to positioning data from Chicago futures markets showing asset managers and leveraged funds building euro-long contracts, a sign speculators remain “quite underweight” the single currency, a conclusion echoed by the broker’s EUR/USD hedging data.
Germany’s August IFO survey, due Tuesday, is expected to extend a recovery seen in Eurozone PMIs after sharp drops in March and April.
Turner said ING sees no need for EUR/USD to fall sharply below support at 1.1660/70 on Monday, though last week’s break-out area would be at risk “if risk assets started to suffer.”
ING’s current forecasts put EUR/USD at 1.17 by end-September and 1.18 by year-end, though Turner said the bank will be reviewing those targets this week.
A shift lower would likely require either a hawkish surprise from Warsh on Friday or a sharper deterioration in risk sentiment tied to the Iran sanctions and U.S.-Canada trade dispute.
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