Sterling Holds Steady as Dollar Finds Support From Higher Treasury Yields

The British pound held steady against the U.S. dollar on Tuesday, as a firmer tone in the U.S. Treasury market helped the greenback recover some ground. The currency pair's muted activity comes as foreign exchange markets await key policy signals from the upcoming Jackson Hole economic symposium later this week.

As of 07:00 ET, the GBP/USD pair was down a marginal 0.01% to trade at $1.3634. The euro also slipped slightly against the dollar, with EUR/USD trading at $1.1663.

Dollar Takes Cues From Bond Market

The dollar's modest strength was primarily linked to moves in U.S. government debt. "The dollar continues to take cues from the US bond market, with a good session for the back-end allowing the greenback to find some support," said Francesco Pesole, an FX strategist at ING.

Developed market currencies have seen a quiet start to the week ahead of the key risk event in Jackson Hole, Wyoming. Investors are also monitoring upcoming U.S. data, including consumer confidence and housing figures, for further direction.

Sterling Lacks Domestic Catalysts

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The pound's price action was driven by broader market dynamics rather than UK-specific fundamentals. With a quiet domestic data calendar, analysts expect a period of low volatility for sterling pairs.

ING noted that market pricing for Bank of England interest rate hikes "remains too hawkish," with current expectations of 32 basis points of tightening by the end of the year seen as excessive. The bank also observed that the EUR/GBP cross has eased back to the 0.8550-60 range, suggesting a positive premium on the euro has been scaled back.

Focus Shifts to Jackson Hole

Looking ahead, market participants are focused on the annual gathering of central bankers at the Jackson Hole symposium for fresh guidance on monetary policy. While ING analysts noted that the "balance of risks for the dollar remains skewed to the downside," they expect the currency to consolidate ahead of the event.

For the euro, ING's models place the short-term fair value for EUR/USD just below 1.160, suggesting the pair is more likely to stabilize than to rally significantly above the 1.170 level at this stage. Germany's Ifo business survey, due later on Tuesday, is the next key data point for the single currency.