The British pound held near a one-week high against the dollar on Friday, as a surprise U.S. Treasury announcement to expand bond buybacks bolstered risk appetite and weighed on the greenback. The pound was last up 0.32% at 1.3672 versus the dollar, while the euro gained 0.27% to 1.1709.
The U.S. Dollar Index (DXY) remained under pressure, consolidating below the 99.00 mark after ING noted support around 98.65–98.70. The bank’s strategists indicated the index would face difficulty breaking back above 99.00 in the near term. ING also maintained its end-of-September EUR/USD target at 1.17, contingent on a break above the 1.1700 resistance level. Further resistance is seen at 1.1790, with support at 1.1650–1.1660.
UBS upgraded its GBP/USD outlook, targeting 1.40 by December 2026 and 1.41 through the first half of 2027. The bank cited resistance at 1.38 and initial support at 1.33. The firm’s strategists, Constantin Bolz and Dominic Schnider, did not specify the catalyst for the revision.
The dollar’s decline followed an unscheduled U.S. Treasury announcement on Wednesday that it would increase bond buyback operations, a move that analysts described as a risk-on signal. The decision came as U.S. Treasury Secretary Scott Bessent hinted at potential fiscal consolidation measures, including a fraud-reduction task force. The budget deficit remains close to 6% of GDP.
ING’s Chris Turner contrasted the current environment with April 2025’s "Liberation Day" episode, when credibility concerns drove flows into safe-haven currencies such as the Swiss franc, euro, and yen. Turner characterized the current market dynamic as a "pro-risk, weak-dollar story."
In the UK, trading volumes were subdued amid the summer parliamentary recess, with Prime Minister Andy Burnham’s November budget drawing early attention. CFTC data showed net sterling positioning remained heavily short. In the eurozone, the ECB’s Consumer Expectations Survey for inflation over the next three years stood at 2.8% in August, following a March reading of 3.0%. An ECB rate hike in September is viewed as fully priced in by markets.
EUR/USD is expected to trade in a narrow range of 1.1670–1.1710 through the near term, according to ING.
