Sterling and Euro Under Pressure

Sterling and the euro fell against the US dollar this week due to rising energy prices and higher US Treasury yields. Markets are increasingly pricing in a more hawkish Fed stance, while UK political uncertainty adds temporary volatility.

Key Takeaways

• 1.Both Sterling and the Euro declined roughly 0.9% against the US Dollar this week, primarily driven by energy price movements.
• 2.Market expectations for the Federal Reserve have shifted toward no rate cuts in 2026, with some investors pricing in a rate increase.
• 3.UK political uncertainty regarding leadership may increase short-term volatility, but fiscal consistency could ultimately support the pound.

Table of Contents

• Sterling and euro move together
• Higher bond yields and Fed expectations support the US dollar versus the euro
• Our FX forecasts
• DISCLAIMER
• CONFLICTS OF INTEREST/DISCLOSURES

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