Sterling edged higher on Monday while the euro showed mixed signals, as market participants prepared for a series of U.S. data releases that could determine the staying power of the dollar's recent gains.
By 05:30 ET (09:30 GMT), GBP/USD had risen 0.11% to 1.3373 and EUR/USD was up 0.10% at 1.1487. Those moves came against a backdrop of commentary from ING strategists who cautioned that data this week could reassert itself as the main influence on the dollar.
"Data could re-emerge as a primary driver for the dollar this week," said ING FX strategist Francesco Pesole. He added that short-term valuation models show the dollar is "a bit expensive across G10." Pesole said dollar bulls may be satisfied with the dollar index holding around 101.0 for now, but warned of downside risk to about 100.50.
ING economists noted that market-implied expectations for Fed tightening at the Oct. 28 meeting have eased slightly to 16 basis points, down from a peak of 19 basis points last week, following a wave of hawkish comments from Federal Reserve officials. The firm expects consensus payrolls of 90,000 for September due on Friday but flagged the possibility of downward revisions to August's 162,000 print. ING said a substantially stronger-than-expected jobs report could push tightening pricing above 20 basis points.
Looking to other U.S. releases, ING highlighted August personal consumption expenditures data due Wednesday and described the August consumer price index on Oct. 14 as "the most important release."
Market moves in sterling appeared linked more to dollar dynamics than fresh UK-specific drivers. ING rates strategist Michiel Tukker noted that with Brent oil near $100, market pricing implies more than four Bank of England hikes over the coming year, which would lift SONIA to roughly 4.75%. However, he said he believes markets have become too hawkish on that outlook.
ING's outlook for UK policy showed divergence within its team. One ING economist does not expect an immediate BoE hike, while Tukker sees scope for eventual easing from 3.75% toward 3.25% as inflation converges to target by mid-2027. Tukker also warned of oil's influence on gilt yields, saying, "For every $10 increase in oil prices, the 2yr gilt yield rises by around 15bp."
On housing, the UK Ministry of Housing, Communities and Local Government said its "Your First Home" scheme, to be confirmed at next month's Budget, would support 2.5% deposits with 20% equity loans for new-build buyers in England, and cited "challenging headwinds" for the sector. The ministry statement was not linked to the day's currency moves.
On the euro, Pesole said ING's models imply EUR/USD should be trading above 1.140 and that the recent dip in the pair looked "a bit overdone." ING expects euro-zone core inflation, due on Friday, to edge up to 2.5%, which the firm said would "confirm there's no sign of second-round effects," but it did not expect that result to shift the European Central Bank toward dovishness. ECB President Christine Lagarde was scheduled to speak on Monday, while ING flagged French bond spreads as a potential downside risk for the euro.
ING's near-term targets put EUR/USD just above 1.140 and the dollar index at about 100.50; the firm did not publish a specific GBP/USD target. "Barring another significant upside surprise in payrolls, we don't see the dollar keeping up with its recent strong momentum," Pesole said.
ING highlighted scenarios that could invalidate that view: a hotter-than-expected U.S. jobs print, a sharp rise in oil prices, or stress in French bonds. Tukker added a geopolitical caveat, warning that "any further escalation in the Middle East would immediately push interest rates higher again."
Market snapshot (as noted):
- GBP/USD: +0.11% to 1.3373
- EUR/USD: +0.10% to 1.1487
- DXY: -0.27%
- GB 2yr yield: -0.09% (GB2YT=RR)
- Brent crude (XBR/USD): -1.55%
This market update reflects strategist commentary and the data calendar that traders are watching closely; it underscores how U.S. labour and inflation releases, oil moves, and European bond developments can rapidly influence currency and interest rate expectations.