The pound held firm against the dollar on Thursday morning, with GBP/USD trading at 1.3248, up 0.05% as of 03:45 ET, after the dollar’s sustained rally encountered headwinds from stretched positioning and a peak in Treasury yields.
The U.S. 10-year Treasury yield remained near its highest level since July 2007, having surged approximately 15 basis points on Wednesday. The move followed stronger-than-expected business activity data, reinforcing expectations that the Federal Reserve will maintain elevated rates for longer than previously anticipated. The repricing drove the dollar index above 101.0.
However, strategists cautioned that the dollar’s strength may be losing steam. Francesco Pesole, FX strategist at ING, said “the dollar rally has accelerated and the move is starting to look stretched,” adding that the bank expects a correction in the DXY over the coming weeks toward the 100–100.5 area if no further upside surprises materialize in U.S. economic data.
Pesole noted that any further upside surprise in upcoming releases could prompt markets to fully price in a potential Federal Reserve rate increase in October. On Thursday, several Fed officials are scheduled to speak—Williams, Barkin, Hammack, and Paulson—adding to the watch list for direction on monetary policy.
In the currency markets, the euro also edged higher, with EUR/USD at 1.1394, up 0.10%. ING’s short-term fair value model places EUR/USD in stretched undervaluation territory following Wednesday’s break below the 1.1400 handle. A meaningful technical floor sits at the June intraday lows of 1.1325–1.1330, Pesole said, and the bank sees conditions for a break into new euro lows only if the short-term rate differential widens further in favor of the dollar. ING’s central case targets a EUR/USD convergence toward 1.1430–1.1450.
Markets were also tracking developments between U.S. President Donald Trump and Chinese President Xi Jinping as their summit unfolded.
