US Dollar Weakens, Sterling Hits More Two-Year High

By Alun John and Gertrude Chavez-Dreyfuss

LONDON/NEW YORK (Reuters) -Sterling climbed to its highest against the U.S. dollar in more than two years on Tuesday, while the greenback slipped broadly after gains the previous session, as investors await key economic data this week and next.

Currency moves remained driven by the prospect of upcoming U.S. interest rate cuts, which has pressured the dollar in recent weeks. Investors see a rate cut at the Federal Reserve’s September meeting as all but certain, with debate now focused on the possibility of a 50-basis-point cut instead of 25.

The rate futures market has attached a 29% probability that the Fed will raise rates by 50 bps, down from 37% late on Friday, according to LSEG calculations. About 100 bps of cuts in 2025 are priced in by futures traders.

Sterling has been one beneficiary of the weakness in the U.S. currency, and on Tuesday the pound hit its highest since March 2022 at $1.3246. It was last up 0.3% at $1.3226.

Sterling stands out because it made a new two-year high,” said Marc Chandler, chief market strategist at Bannockburn Forex in New York.

“The other currencies are consolidating. I would say currencies are nesting before the new leg up, or whether this is what would be the early stages of a dollar correction higher after a huge sell-off this month.”

The pound got support from the contrast between Friday’s remarks by Fed Chair Jerome Powell, which underscored market pricing for meaningful U.S. rate cuts starting next month, and the more cautious comments of Bank of England Governor Andrew Bailey.

(Bailey’s) comments stand to keep a wedge between US and UK rates, where money markets continue to price a shallower and slower easing cycle for the BoE,” Chris Turner, global head of markets at ING, said in a note to clients.

DOLLAR’S BIG MONTHLY DECLINE

The dollar index was down 0.1% at 100.73, after dropping to an eight-month low on Monday. For the month of August, the dollar has fallen 3.3%, on track for its biggest monthly decline since November 2022.

The greenback dipped after data showed U.S. house prices dipped 0.1% on a month-on-month basis after being unchanged in May. They increased 5.1% in the 12 months through June, the smallest year-on-year rise since July 2023,

Tuesday’s report also showed U.S. consumer confidence rose in August. The Conference Board’ consumer confidence index increased to 103.3 this month from an upwardly revised 101.9 in July. The market showed little reaction to the data.

The euro was up a whisker on the dollar at $1.1170, just off Monday’s 13-month top.

“After a strong rally since early August, it looks like euro/dollar could be due some consolidation,” Turner said. The run-up in oil prices on the back of increased Middle East tension and Libyan supply challenges will not be helping.

Oil prices also paused recent advances to trade in a range on Tuesday, after a surge of more than 7% in the previous three sessions, on supply concerns prompted by fears of a wider Middle East conflict and the potential shutdown of Libyan oilfields. [O/R]

One currency boosted by the surge in oil prices is the Canadian dollar, which rose against the U.S. currency, having touched a five-month peak earlier in the session. The U.S. dollar was down 0.2% at C$1.3458.

Elsewhere, the Australian dollar gained 0.1% to US$0.6782, not far from a one-month high of $0.6799 hit on Friday.

Against the Swiss franc, the dollar fell to its lowest since early January and was last down 0.5% at 0.8432 franc.

Currency

bid

prices at

27

August​

03:00

p.m. GMT

Descripti RIC Last U.S. Pct YTD Pct High Low

on Close Change Bid Bid

Previous

Session

Dollar 100.73 100.85 -0.11% -0.63% 100.93 100.

index 69

Euro/Doll 1.1166 1.1161 0.04% 1.16% $1.1179 $1.1

ar 15

Dollar/Ye 144.32 144.56 -0.2% 2.29% 145.135 144.

n 14

Euro/Yen 1.1166​ 161.29 -0.09% 3.55% 162.17 160.

91

Dollar/Sw 0.8433 0.8473 -0.47% 0.21% 0.8484 0.84

iss 23

Sterling/ 1.3232 1.3187 0.36% 4% $1.3246 $1.1

Dollar 15​

Dollar/Ca 1.3453 1.3486 -0.23% 1.5% 1.3488 1.34

nadian 54

Aussie/Do 0.6779 0.6772 0.13% -0.56% $0.6791 $0.6

llar 762

Euro/Swis 0.9416 0.9455 -0.41% 1.4% 0.9474 0.94

s 08

Euro/Ster 0.8437 0.8463 -0.31% -2.67% 0.8468 0.84

ling 36

NZ 0.6231 0.6204 0.46% -1.37% $0.6235 0.61

Dollar/Do 95

llar

Dollar/No 10.4811​ 10.5295 -0.46% 3.41% 10.5539 10.4

rway 805

Euro/Norw 11.7047 11.7726 -0.58% 4.28% 11.786 11.7

ay 045

Dollar/Sw 10.1788 10.213 -0.33% 1.11% 10.2275 10.1

eden 76

Euro/Swed 11.3673 11.4016 -0.3% 2.17% 11.4184 11.3

en 59

(Reporting by Gertrude Chavez-Dreyfuss in New York and and Alun John in London; Additional reporting by Rae Wee in Singapore; Editing by Jamie Freed, David Evans, Helen Popper and Jonathan Oatis)