Sterling and the euro both lost ground against the US dollar on Wednesday as a sell-off in technology stocks triggered wider safe-haven buying of the greenback, adding to separate domestic headwinds facing the UK and the eurozone.
By 08:15 ET (12:15 GMT), GBP/USD was down 0.28% at 1.3158. EUR/USD was weaker by 0.37% at 1.1340, marking its lowest level since June 2025.
For the pound, a reduction in political uncertainty was insufficient to counteract weak economic signals. Markets had reacted positively earlier to signs that a prolonged Labour leadership contest might be less likely following Keir Starmer's resignation, with Andy Burnham emerging as the frontrunner and reported backing from former health secretary Wes Streeting. Nevertheless, those developments did not prevent sterling's slide amid broader dollar strength.
The euro's decline was driven chiefly by the wider equity market downturn, with additional pressure stemming from purchasing managers' indices. Germany's services PMI fell from 48.1 to 46.8, pushing its composite measure further into contraction. The eurozone composite PMI was at 49.5, close to the threshold for returning to expansion but still below it.
European Central Bank Chief Economist Philip Lane took a hawkish tone, warning that inflation is set to remain above 2% for some time - a stance that appeared to push back against ECB President Christine Lagarde's more dovish messaging earlier in the week. ING analyst Francesco Pesole said Lane's comments likely reflect current consensus within the ECB Governing Council and expects more members to embrace a hawkish position.
On the US side, Federal Reserve official Austan Goolsbee said that inflation is too high and "going the wrong way." ING cautioned that it remains "very cautious about picking a top" in the recent dollar move, adding that while the rally has not yet established a new bullish dollar cycle, near-term momentum for the dollar remains on the upside.
ING's Pesole also warned that EUR/USD is "at risk of testing 1.130 sooner than later," though he noted the pair is already near 1% undervalued relative to ING's fair-value estimate and could recover if market bets on Fed hawkishness ease.
Market context:
- GBP/USD: 1.3158, down 0.28% as of 08:15 ET (12:15 GMT)
- EUR/USD: 1.1340, down 0.37%, weakest since June 2025
- Germany services PMI: 48.1 to 46.8
- Eurozone composite PMI: 49.5