The British pound remained steady against a weaker U.S. dollar on Friday, as markets continued to digest an unexpected U.S. Treasury announcement to increase bond buybacks. Analysts view the move as a signal to cap long-term yields, creating a 'pro-risk' environment.
Government bond yields in the U.S. and Europe rose for a second consecutive week, pushing borrowing costs back toward multi-decade highs as investor concerns over growing fiscal deficits and persistent inflation overshadowed government support measures.
UBS has raised its price target for the EUR/USD currency pair, citing diverging monetary policy outlooks where the Federal Reserve is expected to pause rate hikes while the European Central Bank continues to tighten.
UBS forecasts the British pound will strengthen against the euro, citing a significant yield advantage and potential for short-covering. The bank sees the EUR/GBP pair drifting toward 0.84, though it warns UK political risks could challenge the outlook.
UBS is maintaining a neutral stance on the Japanese yen, arguing that the wide monetary policy divergence between a hawkish U.S. Federal Reserve and a cautious Bank of Japan will continue to support the USD/JPY pair.
Strategists at Citigroup have significantly lowered their three-month forecast for the U.S. Dollar Index, pointing to the Treasury's bond buyback program and political uncertainty ahead of midterm elections as key headwinds.
The British pound advanced against a broadly weaker U.S. dollar after the U.S. Treasury signaled its intent to curb rising long-term bond yields through expanded buyback operations, boosting global risk sentiment.
The U.S. Dollar Index fell to its lowest point since early June as recent economic data fueled speculation that the Federal Reserve will hold interest rates steady at its next meeting.
India has amended its foreign trade policy to grant exporters receiving payments in rupees the same incentives as those paid in foreign currencies, a significant step toward internationalizing the national currency.
