The British pound traded 0.32% higher at 1.3672 on Friday as the U.S. dollar remained under pressure following an unscheduled announcement by the Treasury to expand bond buyback operations. The move, which followed remarks by Treasury Secretary Scott Bessent hinting at potential fiscal consolidation, reinforced a softer dollar tone that supported risk assets and high-beta currencies.
ING’s Global Head of Markets Chris Turner characterized the week’s developments as a shift toward protecting longer-dated Treasury yields, framing the intervention as a "soft dollar, pro-risk story." Turner noted that the U.S. Treasury’s focus on the long end of the curve could temper the dollar’s decline while favoring commodity-linked and emerging market currencies. He added that EUR/USD was likely to consolidate within a tight range of 1.1670 to 1.1710 on Friday, with resistance at 1.1700 and support at 1.1650/60.
UBS strategists Constantin Bolz and Dominic Schnider warned that long-dollar positioning remains vulnerable to a reversal as market expectations for further Federal Reserve tightening fade. They highlighted that if rate hikes are fully removed from pricing, existing long-dollar positions could unwind, potentially accelerating the dollar’s retreat. UBS set a GBP/USD target of 1.40 by December 2026 and 1.41 for the first half of 2027, with initial resistance at 1.38 and support at 1.33.
The dollar index (DXY) showed signs of stabilization, holding support at 98.65/70 but struggling to reclaim levels above 99.00, according to ING. The firm’s strategists suggested the index may face continued headwinds in the near term. Meanwhile, the European Central Bank’s Consumer Expectations Survey, released in March, showed three-year inflation expectations at 3.0%, with a slight easing to 2.8% in subsequent readings.
UK market focus remained limited due to the summer parliamentary recess, with traders adopting a wait-and-see approach ahead of the November budget. CFTC positioning data indicated that GBP net bets remained heavily short, a dynamic that could amplify any positive shift in UK fiscal credibility through short-covering activity.
U.S. and Eurozone economic calendars on Friday featured August S&P PMI readings, expected to show continued expansion across both regions. Analysts noted that the week’s primary catalyst—U.S. Treasury buybacks—overshadowed other macroeconomic developments, reinforcing a risk-on tone in global currency markets.
