Pound Sterling Holds Near Multi-Week High as Dollar Trades Sideways Ahead of Fed Minutes

The British pound traded with little change on Tuesday, holding close to multi-week highs as the U.S. dollar remained subdued ahead of the release of minutes from the Federal Reserve's latest policy meeting.

As of 06:30 ET (10:30 GMT), the GBP/USD currency pair was down a marginal 0.04% to trade at $1.3382, just below the peak near $1.34 reached on Monday, its strongest point since mid-June. Meanwhile, the EUR/USD pair eased 0.10% to $1.1430.

Dollar Awaits Fed Catalyst

The U.S. dollar was range-bound as currency traders found few reasons to take significant positions amid a quiet economic data calendar. Market attention is firmly fixed on Wednesday's release of the Federal Open Market Committee (FOMC) minutes for fresh insights into the central bank's interest rate trajectory.

According to Francesco Pesole, an FX strategist at ING, markets require a "convincing narrative to short the high-yielding dollar" in the current environment. The bank does not expect the upcoming minutes to provide a dovish surprise that would trigger such a narrative. Comments on Monday from Fed Governor Christopher Waller, who said risks to the outlook "have flipped on the hawkish side," added little new information for markets, ING noted.

UK Housing Data Shows Modest Rise

Domestically, the only notable data release was the Lloyds’ house price index, which offered a mixed view of the UK property market. Key figures from the report include:

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• Average house prices rose 0.2% in June, following three consecutive months of softness.
• Annual price growth edged up slightly to 0.6% from 0.5%.

"Mortgage rates have eased from their recent highs, offering some encouragement to those considering a move," said Amanda Bryden, head of mortgages at Lloyds. However, she added that housing affordability remains stretched for many potential buyers.

Market Outlook

Analysts suggest that significant moves in major currency pairs are unlikely until the FOMC minutes provide a clearer signal. ING stated that its view on the dollar would only shift on a dovish surprise from the Fed or a major change in the carry-trade environment.

The bank expects the U.S. Dollar Index (DXY) to remain closer to the 101.0 level. Consequently, any further advance for the pound may depend more on developments in the UK's government bond (gilt) market rather than a change in the U.S. rate outlook.