Sterling traded higher on Tuesday while the euro also edged up, as the dollar consolidated in quiet trading with energy-market and French fiscal risks still unresolved.
GBP/USD was up 0.35% at $1.3352, a gain of 0.0046. EUR/USD rose 0.19% to $1.1233, up 0.0021.
The dollar slipped against commodity currencies, but gained against the yen and Swiss franc. ING’s Chris Turner said the week had begun quietly, though “none of the key themes and threats have really changed.”
Turner said energy prices were “staying at their highs, preventing much of a correction in bond yields,” amid concern the United States and Israel may again attack Iran before the U.S. mid-term elections.
He named Coreweave’s 2032 bond, still trading at 80 cents on the dollar, as the main threat. “This represents the key threat to dollar strength,” he said.
“Overall, we expect energy and French news to dominate, meaning that the DXY dollar index should find further support at 101.50/60,” Turner said.
Short-dated U.S. rates edged up modestly. Tesla, Meta and IBM report third-quarter earnings on Wednesday.
“Softish US housing data looks unlikely to weigh on the dollar and the weekly ADP employment data is not usually a market mover,” Turner said. “Barring a major leg lower in US tech stocks… we expect the dollar to remain relatively supported.”
Sterling’s rise looked driven by dollar softness rather than UK fundamentals, which sent mixed signals to the Bank of England.
Unemployment fell to 4.7% in the three months to August, below the 4.9% forecast, the Office for National Statistics said. But vacancies fell 2.9% to 691,000, the lowest outside the pandemic since 2014, and total pay growth slowed to 3.7%, the weakest since late 2020.
Payrolled employees fell 0.4% year-on-year in August. The ONS said the labour market remains broadly flat in 2026.
The euro found “a little support even as French debt spreads widen,” Turner said. French lawmakers vote on the revenue side of the 2027 budget, and Moody’s reviews France’s rating on Friday. Turner said it could cut France to a single-A rating, which he called expected.
“While a period of consolidation/correction looks necessary after a big fall in September, the case for a EUR/USD recovery remains weak,” Turner said. “A move to 1.1180 looks as likely as a rally to 1.1270.”
French cities were calm overnight under curfews imposed after last weekend’s riots and looting, with PM Sebastien Lecornu saying they could be extended “where the situation requires it” and admitting “things that were screwed up” in the security response.
Justice Minister Gerald Darmanin said 123 people await trial and about 2,500 remain in custody, as school protests over falling standards have widened into anger over prices and public services ahead of next year’s presidential election.
ING sees DXY support at 101.50/60. Its dollar-supportive view would be challenged by a sharp fall in U.S. tech stocks or a worsening in data-centre credit.