Sterling remained stable during Tuesday’s trading near its recent levels, while the euro moved calmly and the dollar stayed within a narrow range ahead of the release of the Federal Reserve meeting minutes. This quiet performance came amid a lack of major U.S. economic data and continued cautious remarks from Federal Reserve officials.
GBP/USD slipped slightly to $1.3382, holding near its strongest levels since mid June after approaching the $1.34 level in the previous session. EUR/USD also declined to $1.1430, reflecting weak momentum and the absence of strong catalysts capable of pushing European currencies into a clear direction.
ING believes that selling the dollar at this stage requires a stronger justification, especially as the U.S. currency continues to benefit from its yield advantage compared with several major currencies. According to the bank, the dollar index may remain close to 101.0 unless the Fed minutes deliver a clear dovish surprise.
Christopher Waller’s comments supported this view after he indicated that risks have shifted toward the hawkish side, reflecting the Fed’s continued caution toward any rapid shift in the interest rate path. However, his remarks did not provide markets with enough fresh signals to change positioning before the minutes.
In the United Kingdom, Lloyds’ house price index showed a limited improvement in June, with prices rising 0.2% month on month after three months of weakness, while annual growth increased to 0.6%. Although mortgage rates have eased from recent highs, affordability pressures continue to limit the strength of the housing market recovery.
In the eurozone, the single currency remained under some pressure despite stronger than expected German industrial data. German industrial production rose 0.9% in May, supported mainly by the automotive sector, but this improvement was not enough to change the broader picture after Fabio Panetta warned that the eurozone outlook remains fragile.
On the political front, markets followed a Paris court ruling on Marine Le Pen’s eligibility to run for public office, but the expected impact on the euro remained limited. Investors appear to have already priced in scenarios involving gains for the National Rally, while expecting fiscal policy to remain disciplined.
Meanwhile, the dollar regained support from its safe haven role as tensions escalated in the Middle East. The U.S. Treasury revoked a license that had allowed transactions related to Iranian oil and petroleum products, following fresh attacks on vessels near the Strait of Hormuz.
These developments pushed oil prices more than 5% higher, as concerns grew over shipping security in one of the world’s most important energy routes. The escalation between Washington and Tehran also increased demand for defensive assets and lifted the dollar index by 0.2% to 101.10.
Although monetary policy had been the main driver of the dollar in recent weeks, geopolitical developments temporarily reshaped market movement. After a weak U.S. jobs report weighed on the dollar late last week, oil and inflation concerns returned to give the currency fresh support.
Markets are now waiting for the Fed’s June meeting minutes, especially after half of the committee members signaled that rate hikes could still be justified this year. This set of minutes carries added importance as the first under Kevin Warsh, who appears to be moving toward less reliance on forward guidance and a stronger focus on actual inflation data.
The Japanese yen remained under strong pressure despite positive wage data that kept the possibility of further Bank of Japan rate hikes alive. USD/JPY held near 162.10, while the yen reached its weakest level against sterling since 2007, keeping traders alert to the possibility of intervention from Japanese authorities if pressure on the currency continues.
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