The pound sterling declined on Wednesday against the dollar, while the euro remained almost unchanged near annual lows under pressure from the strengthening of the US currency.
Pound sterling traded lower on Wednesday, while the euro barely changed, staying near yearly lows. Dollar strengthening and investor caution ahead of the Federal Reserve's decision put pressure on European currencies.
The pound fell 0.18 percent against the dollar and reached 1.3283 dollars, while the euro declined 0.01 percent to 1.1125 dollars as of 13:17 Moscow time.
The easing of concerns about a possible sell-off of shares related to artificial intelligence allowed markets to refocus on factors supporting the dollar after strong third-quarter results. Dollar index futures rose 0.6 percent.
According to Chris Turner from ING, stabilization in the AI segment has shifted the currency market's attention to rising energy prices, accelerating inflation and central bank responses. The dollar index was approaching its annual highs near 102.35 points. Breaking the 102.50 level could open the way to 103.00.
The Fed will conclude its monetary policy meeting later on Wednesday. ING expects that the emphasis on restoring monetary stability will maintain the hawkish tone of rhetoric and support the dollar. The Bank of Canada will also make a decision on the interest rate.
The UK budget will be presented later on Wednesday. ING does not expect it to have a significant impact on the prospects for tightening the Bank of England's policy. ING interest rate strategist Michiel Tucker estimates the risk premium in the yield of 10-year UK government bonds at approximately 20 basis points.
The euro was under pressure due to the general strengthening of the dollar and the unresolved budget crisis in France. The ECB lending survey showed tightening conditions and an unexpected decline in demand for corporate loans. The level 1.1065/1.1110 is considered important support for the euro. ING believes that the EUR/USD pair risks testing the 1.0880 level in case of a support break.