Dollar Dives, Europe Pushes Back and Sterling Rides the Wave Ahead of the Fed.

USD – Under pressure ahead of Fed, with political comments adding volatility.

EUR –Firm after sharp gains, with policymakers starting to push back.

GBP – Elevated on USD weakness, but direction hinges on the Fed.

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USD:

The US dollar weakened sharply on Tuesday after a brief pause earlier in the week, sliding to fresh multi-year lows against several major currencies. The move saw both the euro and sterling reach levels last seen around four and a half years ago. With the data calendar offering little in recent days, focus now turns squarely to today’s Federal Reserve decision. A rate hold is fully expected, leaving markets concentrated on Chair Powell’s tone — particularly around political scrutiny and renewed calls from the White House for aggressive rate cuts.

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EUR:

The euro remains well supported following its rapid ascent, though the strength of the move has begun to draw attention from ECB officials. Additional commentary from ECB members Elderson and Schnabel is due later, while Germany’s GfK consumer confidence reading showed a modest improvement this morning. Despite these developments, EUR/USD remains underpinned by broad dollar weakness. Governing Council member Kocher suggested that sustained euro appreciation could eventually prompt a policy response if it dampens inflation via cheaper imports, while noting that current gains remain manageable

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GBP:

Sterling pushed to its strongest level since mid-2021 against the dollar, driven almost entirely by USD selling rather than UK-specific factors. With little domestic news to guide markets, GBP price action remains closely tied to broader dollar dynamics. Absent any surprise UK headlines, attention is firmly on the Federal Reserve, which is expected to be the dominant driver of near-term direction.

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