Sterling Holds Near Multi-Week High as Dollar Pauses Ahead of Fed Minutes

The British pound traded with little change on Tuesday, holding near multi-week highs as the U.S. dollar remained in a narrow range ahead of key monetary policy insights. The GBP/USD pair was down a marginal 0.04% at $1.3382, just shy of its strongest point since the middle of June.

Dollar Awaits Fed Catalyst

Currency market volatility was subdued due to a quiet U.S. economic calendar, leaving investors to await the release of the Federal Open Market Committee (FOMC) minutes on Wednesday for fresh direction. Recent commentary from Federal Reserve Governor Christopher Waller, who noted that risks to the outlook "have flipped on the hawkish side," did little to move markets, according to analysts.

Analysts at ING noted that the market currently lacks a compelling reason to bet against the high-yielding dollar. "Markets probably require a convincing narrative to short the high-yielding dollar in such a favourable environment for carry," said Francesco Pesole, an FX strategist at ING. The bank expects the Dollar Index (DXY) to remain supported closer to the 101.0 level unless the Fed minutes deliver a significant dovish surprise.

UK Housing Data Shows Resilience

In the UK, the only notable data release was the Lloyds house price index. The report offered a mixed but slightly positive picture of the property market:

Ad

• Average prices rose 0.2% in June, ending three consecutive months of declines.
• Annual price growth edged up 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 cautioned that affordability remains a significant challenge for buyers.

Market Outlook

Elsewhere, the euro also drifted, with EUR/USD easing 0.10% to $1.1430. According to ING, a significant shift in the dollar's trajectory would likely require either a dovish turn in the FOMC minutes or a change in the interest rate environment that makes carry trades less attractive.

Absent these developments, analysts suggest that further gains for sterling may depend more on domestic factors, such as UK government bond (gilt) market movements, rather than a weakening of the U.S. interest rate outlook.