Sterling Rebounds After Ramsden Comments as US Yields Hit Multi-Year Highs

Sterling recovered from recent lows on Monday after Bank of England (BoE) Deputy Governor Dave Ramsden said there could be a case for raising interest rates if upside inflation pressures continue to build. GBP/USD rose to around 1.3259 from a three-month low near 1.3204, while sterling also gained against the euro as markets increased expectations for further BoE tightening. Money-market futures on Monday implied roughly an 85% probability of a 25-basis-point increase in November.

The move came alongside a rise in UK household inflation expectations. One-year expectations increased to 4.5% in September from 3.9% in August, while longer-term expectations rose to 4.3% from 4.1%. Higher energy prices remain an important risk for the BoE, particularly if they begin to feed into wages and broader domestic price pressures.

US Treasury yields also moved sharply higher, with the 10-year yield reaching its highest level since 2007 and the 30-year yield its highest since 2004. The Dollar Index (DXY) was trading around 101.27 early Tuesday, close to a two-month high, while EUR/USD remained near 1.1360. Markets are now focused on whether upcoming US labour and inflation data reinforce expectations for further Federal Reserve (Fed) tightening.

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GBP: Sterling Recovers as BoE Rate Expectations Firm

GBP/USD: 1.3235 | EUR/GBP: 0.8575

GBP/USD is trading around 1.3235 after sterling recovered from a three-month low of 1.3204 during Monday’s session. The rebound followed comments from Bank of England (BoE) Deputy Governor Dave Ramsden, who said there could be a case for raising Bank Rate if upside inflation pressures continue to build.

Ramsden’s remarks added to expectations of further BoE tightening if higher energy and food costs begin to feed more broadly into domestic inflation. Money-market futures on Monday implied roughly an 85% probability of a 25-basis-point increase in November, while Ramsden also highlighted potential second-round effects through food prices and wages.

Sterling also strengthened against the euro, with EUR/GBP falling towards the 0.8565 area as the market reassessed the relative outlook for UK and Eurozone rates. The cross had previously traded near 0.8610, while Ramsden’s remarks added to expectations of further BoE tightening.

Investors are also awaiting further BoE communication and Wednesday’s updated UK second-quarter GDP figures for the next domestic update on growth conditions.

Key technical reference levels for GBP/USD: resistance sits near 1.3274, followed by 1.3315, while support sits around 1.3222, followed by 1.3193.

Key technical reference levels for EUR/GBP: resistance sits near 0.8610, followed by 0.8630, while support sits around 0.8570, followed by 0.8560.

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EUR: Euro Stays Near Recent Lows as Lagarde Favours Measured Response

EUR/USD: 1.1349

EUR/USD is trading around 1.1349, keeping the euro close to its recent lows against the US dollar. The pair has struggled to recover as elevated US Treasury yields and expectations for further Federal Reserve (Fed) tightening continue to support the dollar.

European Central Bank (ECB) President Christine Lagarde said a measured policy response remains appropriate despite Eurozone inflation moving above 3% and potentially rising further later this year. She noted that the latest inflation increase has been driven largely by higher oil and gas prices rather than stronger domestic wage pressures.

Lagarde also said there is currently little evidence that the energy shock is becoming embedded through wages or broader second-round effects. Lagarde said the limited evidence of second-round effects supported a measured policy response.

EUR/USD remains under pressure as elevated US yields support the dollar, while markets assess the implications of higher Eurozone inflation and the ECB’s measured policy stance. Attention now turns to fresh European inflation data for further guidance on the regional price outlook.

Key technical reference levels for EUR/USD: resistance sits near 1.1420, followed by 1.1455, while support sits around 1.1360, followed by 1.1320.

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USD: Dollar Holds Near Two-Month High as Yields Extend Their Rise

DXY: 101.27

The Dollar Index (DXY) is trading around 101.27, holding near a two-month high as US Treasury yields remain elevated. The 10-year yield has moved towards levels last seen in 2007, while the 30-year yield has also reached multi-year highs, keeping the relative yield advantage of the dollar in focus.

Federal Reserve (Fed) Governor Lisa Cook said she expects inflation pressures to remain elevated in the coming months, citing higher oil prices and demand linked to artificial-intelligence investment. She stopped short of saying that further rate increases would definitely be required, but noted that the labour market appears able to withstand higher borrowing costs.

Interest-rate markets are pricing around a 70% chance of another Fed rate increase in October, reflecting continued concern that inflation may remain above target for longer. The dollar has remained supported alongside elevated yields, expectations of further Fed tightening and resilient economic activity.

Attention now turns to today’s US JOLTS Job Openings and Conference Board Consumer Confidence data for the next update on labour-market conditions and household demand, ahead of a heavier run of inflation and employment data later this week.

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Other Currencies: Aussie Briefly Rises After RBA Hike as Yen Intervention Risks Persist

AUD/USD: 0.7015 | NZD/USD: 0.5650 | USD/JPY: 157.50 | GBP/JPY: 208.70

AUD/USD is trading around 0.7015 after the Reserve Bank of Australia (RBA) raised its cash rate by 25 basis points to 4.60%, the highest level in 15 years. The decision was unanimous and marked the fourth increase this year. The RBA said inflation remains too high and indicated that further tightening could be considered if price pressures persist. The Australian dollar initially rose to around 0.7029 following the decision before giving back part of the move.

USD/JPY is holding near 157.50 as markets continue to balance elevated US yields against the risk of intervention by Japanese authorities. Japan’s top currency diplomat Atsushi Mimura reinforced concerns over excessive yen weakness, saying markets should take recent warnings from Tokyo and Washington seriously. The remarks provided some support to the yen, although the wide US-Japan interest-rate differential remains an important factor for the pair.

NZD/USD remains near 0.5650, close to recent lows. Markets continue to price a further Reserve Bank of New Zealand (RBNZ) rate increase in October, although broader US-dollar strength continues to limit the kiwi’s recovery.

GBP/JPY is trading around 208.70, with sterling supported by expectations of further BoE tightening while intervention concerns remain in focus for the yen.

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Current Rate Table

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Market Lookahead

Tuesday, Sep 29

• EUR Spain HICP (Sep)

Wednesday, Sep 30

• UK GDP (Q2, Final)
• US PCE Price Index & Core PCE Price Index (Aug)

Thursday, Oct 01

• EUR Eurozone HICP & Core HICP (Sep)
• US ISM Manufacturing PMI (Sep)

Friday, Oct 02

• US Nonfarm Payrolls (Sep)
• US Average Hourly Earnings (Sep)
• US Unemployment Rate (Sep)

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