Sterling fell against the dollar on Monday as investors positioned for a week of central bank meetings. Energy prices and Middle East tensions kept the dollar supported ahead of Wednesday's Federal Reserve decision, where markets expect rates to stay on hold.
Sterling traded lower on Monday as the dollar held its ground before the Fed meeting. The pound was down 0.22% against the dollar at $1.3348 as of 05:35 ET (09:35 GMT). The euro, by contrast, was up 0.09% at $1.1213.
Energy prices and Middle East tensions support the dollar
ING's Chris Turner says the dollar can probably hold its gains. According to Turner: "The balance of risks suggests that the dollar can probably hold onto its gains"
Turner pointed to energy prices that remain at their highs and a third US aircraft carrier group arriving in the Gulf, which he said makes further escalation more likely than not. He expects the DXY dollar index to hold a 101.45-101.85 range today. A drop to 101.25 would need US tech to drag US equities sharply lower.
Fed expected to hold, with hawks possibly dissenting
Markets and economists expect the Fed to hold rates on Wednesday. Vice Chairs Philip Jefferson and Michelle Bowman and Governor Chris Waller have signalled no rush to act, and Chair Kevin Warsh declined to talk up a hike at the IMF meetings.
Beth Hammack, Neel Kashkari and Lorie Logan, who voted to hike in July, are hawkish and could dissent again. ING forecasts a 25 basis point rate hike in December.
Earnings and CPI also on the calendar
Big tech earnings from Alphabet and Microsoft on Wednesday are also in focus, and November CPI is due the day after the Fed meeting. ING gave no sterling target.
Source: Investing.com
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