Sterling Gains as Dollar Eases on U.S. Tech Sector Retreat

The British pound edged higher against the U.S. dollar on Thursday, benefiting from a modest pullback in the greenback as investors trimmed exposure to crowded U.S. technology stocks and long dollar positions.

Dollar Softens on Tech Pullback

Sterling traded up 0.10% at $1.3406, while the euro saw a smaller gain of 0.02% to $1.1235 as of 05:17 ET, according to market data. The dollar's softness came as declining U.S. Treasury yields and a retreat in major technology stocks prompted what analysts described as a minor defensive rotation into European currencies.

"The biggest market driver at the moment is the heavy and concentrated positioning in U.S. tech and the dollar, which is being gently pared back," said Chris Turner, Global Head of Markets at ING, in a note cited by Investing.com. He added that a significant, broad-based dollar decline is unlikely until yields at the short end of the U.S. curve begin to fall.

Contrasting Central Bank Outlooks

While primarily driven by dollar weakness, sterling also found support from domestic factors. Persistent UK inflation data released Wednesday has reinforced market expectations that the Bank of England could raise interest rates as soon as its November meeting. Investors in the UK are also monitoring next week's upcoming fiscal budget for further direction.

Ad

In contrast, the Federal Reserve is widely expected to keep interest rates unchanged at its Oct. 27-28 meeting. Last week, Fed Chair Kevin Warsh highlighted price stability as a key focus but refrained from offering explicit rate guidance. Similarly, the European Central Bank is expected to hold rates steady at its Oct. 29 policy meeting.

Key Data and Levels Ahead

Traders are now looking toward upcoming U.S. economic data for fresh catalysts, including Friday’s flash PMI figures and weekly initial jobless claims. These releases will be watched for further clues on the health of the U.S. economy.

For the euro, ING analysts noted that a break above technical resistance at the $1.1270/75 level would be required to open a path toward $1.1340/50. The bank maintains a one-month EUR/USD forecast of $1.1300.