# Pound hits 10-month peak, euro up as dollar under pressure
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-04-04
Category: FINANCE
Category URL: https://financedigest.com/category/finance
Meta Title: GBP Hits 10-Month High Against USD as Market Bets on End of
Meta Description: Stay updated with the latest news as the British pound rises to a new 10-month high against the dollar, reflecting market sentiments on U.S. rate hikes.
URL: https://financedigest.com/pound-hits-10-month-peak-euro-up-as-dollar-under-pressurehtml

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By Alun John

LONDON (Reuters) – The British pound rose to a new 10-month high against the dollar on Tuesday, and the euro reached its highest in two months, as the U.S. currency continued to suffer from [market bets that the end](https://www.financedigest.com/roller-screw-market-ending-up-at-a-valuation-of-around-us-457-5-mn-by-2031.html "Roller Screw Market Ending Up At A Valuation Of Around US$ 457.5 Mn By 2031") of the U.S. rate-hiking cycle is near.

Sterling rose 0.84% to $1.2521, its highest since June 2022, after breaching a significant [resistance level](https://www.financedigest.com/using-agility-to-resist-economic-instability-and-level-the-playing-field.html "Using agility to resist economic instability and level the playing field").

“$1.2448 has been a huge technical chart resistance. It has been a high twice this year,” said Joe Tuckey, head of FX analysis at Argentex.

Breaking through this [means it is an initiation point for fresh sterling buyers](https://www.financedigest.com/what-brexit-mean-for-british-buyers-in-spain.html "WHAT BREXIT MEAN FOR BRITISH BUYERS IN SPAIN"), a short covering area for sterling shorts.

The [dollar also weakened against most other European currencies and the euro](https://www.financedigest.com/dollar-trims-gains-vs-euro-after-u-s-inflation-data.html "Dollar trims gains vs euro after U.S. inflation data") reached $1.0938, its most since early February, and was last up 0.14% at $1.0918.

We’ve been [saying that FX hasn’t really captured what’s been happening](https://www.financedigest.com/who-is-stormy-daniels-and-what-did-she-say-happened-with-trump.html "Who is Stormy Daniels and what did she say happened with Trump?") in rates, and there is scope still for the dollar to weaken a bit further,” said Derek Halpenny, head of research for global markets at MUFG.

“Short-term spreads between core Europe and the U.S. are more consistent with euro-dollar trading near $1.10 to $1.15.”

U.S. and European government bond yields fell dramatically last [month as investors](https://www.financedigest.com/6-months-to-go-until-brexit-and-investor-sentiment-remains-bold.html "6 months to go until Brexit and investor sentiment remains bold") rushed to buy safe-haven assets due to fears about the banking sector, and while they have rebounded a little they remain well below recent highs.

The [German two-year yield has dropped 70 basis points](https://www.financedigest.com/low-use-of-shortened-work-hours-points-to-mild-german-recession-ifo.html "Low use of shortened work hours points to mild German recession – Ifo") since its March highs and was last at 2.687%, but U.S. moves have been even more dramatic.

The U.S. two-year yield was last at 3.9978%, down a full percentage point from its early March highs, after the banking turmoil caused [traders to reassess expectations that there were still several Federal Reserve rate hikes](https://www.financedigest.com/dollar-hits-one-month-high-against-yen-as-traders-bet-on-fed-rate-hike.html "Dollar hits one-month high against yen as traders bet on Fed rate hike") ahead.

[Market pricing presented by CME’s Fedwatch tool indicates around a 45% chance Fed](https://www.financedigest.com/markets-start-signalling-fed-may-be-going-too-far-amundi.html "Markets start signalling Fed may be going too far – Amundi") rates are at their current level – 4.75%-5.0% – by July, in three rate-setting meetings time, with a 15% chance they’re at 4.5%-4.75%, and a 35% chance they are at 5.0%-5.25%.

The latest [data to support a slowing in rate](https://www.financedigest.com/dollar-advances-as-strong-u-s-data-backs-higher-rates-backdrop.html "Dollar advances as strong U.S. data backs higher rates backdrop") increases was from a Monday survey by the Institute for Supply Management (ISM) that showed that manufacturing activity fell to the lowest in nearly three years in March as new orders continued to contract, with all sub-components of its manufacturing PMI below the 50 threshold for the first time since 2009.

Traders still think the [European Central Bank](https://www.financedigest.com/dollar-outshines-euro-sterling-amid-european-bank-jitters.html "Dollar outshines euro, sterling amid European bank jitters") has more rate hikes to come however.

In a further sign that the end of global rate hikes is approaching, the Reserve Bank of Australia (RBA), as expected, left its cash rate unchanged at 3.6%, breaking a run of 10 straight hikes as policymakers said additional time was needed to “assess the [impact of the increase in interest rates to date and the economic](https://www.financedigest.com/dollar-skids-after-soft-u-s-economic-data-impact-of-opec-cuts-fades.html "Dollar skids after soft U.S. economic data; impact of OPEC+ cuts fades") outlook.

The [Australian dollar](https://www.financedigest.com/asian-stocks-make-7-month-highs-australian-dollar-gains-on-hot-inflation.html "Asian stocks make 7-month highs, Australian dollar gains on hot inflation") was last down 0.5% at $0.6751.

(The RBA) seem content that inflation has peaked and opted to not pull the hiking trigger [ahead of the quarterly inflation report in a few weeks,”](https://www.financedigest.com/dollar-dips-ahead-of-inflation-data-later-this-week.html "Dollar dips ahead of inflation data later this week") said Matt Simpson, senior market analyst  at City Index.

Unless the RBA are presented with a surprise uptick on the quarterly inflation print, I think the RBA will be happy to sit with 3.6% for the [next two to three months.”](https://www.financedigest.com/ferry-industry-celebrates-fifth-successive-year-of-growth-for-car-travel-by-sea-and-four-new-ships-launching-in-next-twelve-months.html "Ferry industry celebrates fifth successive year of growth for car travel by sea And four new ships launching in next twelve months")

Elsewhere, the dollar rose 0.4% against the [Japanese yen](https://www.financedigest.com/japanese-yen-gains-as-ueda-set-to-be-named-next-boj-governor.html "Japanese yen gains as Ueda set to be named next BOJ governor") to 133, and the U.S. dollar index, which tracks the unit against a [basket of currencies](https://www.financedigest.com/the-yuan-makes-its-official-entry-into-rawbanks-currency-basket.html "The yuan makes its official entry into RAWBANK’s currency basket") was steady at 102.01.

[(Reporting by Alun John in London and Rae Wee in Singapore; additional reporting by Harry](https://www.financedigest.com/britains-prince-harry-arrives-at-balmoral-itv-reporter.html "Britain’s Prince Harry arrives at Balmoral – ITV reporter") Robertson in London; Editing by Edmund Klamann, Bernadette Baum and Sharon Singleton)


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