The British pound and euro weakened against the U.S. dollar on Wednesday as a technology-led stock market sell-off increased demand for safe-haven assets.
Domestic political and economic concerns in the United Kingdom and eurozone added further pressure to both currencies.
Pound and Euro Fall Against the Dollar
At 08:15 ET, GBP/USD was trading 0.28% lower at 1.3158.
Meanwhile, EUR/USD declined 0.37% to 1.1340. This marked the currency pair’s weakest level since June 2025.
The dollar benefited as investors moved away from risk-sensitive assets following heavy losses in technology stocks.
Weak Economic Data Pressures Sterling
Reduced political uncertainty in the United Kingdom was not enough to support the British pound.
Investors welcomed signs that a lengthy Labour Party leadership contest had become less likely following Keir Starmer’s resignation.
Andy Burnham was viewed as the leading candidate, with backing from former Health Secretary Wes Streeting. However, weak economic data continued to weigh on sterling.
Eurozone PMI Data Signals Economic Weakness
The euro’s decline was mainly driven by the broader stock market sell-off. However, weaker purchasing managers’ index data added to the pressure.
Germany’s services PMI fell from 48.1 to 46.8, moving further below the 50 level that separates expansion from contraction.
The decline also pushed Germany’s composite PMI deeper into contraction.
By comparison, the wider eurozone composite PMI reached 49.5, placing the region close to a return to economic expansion.
ECB Official Warns About Persistent Inflation
European Central Bank Chief Economist Philip Lane adopted a more hawkish tone on monetary policy.
Lane warned that eurozone inflation could remain above the ECB’s 2% target for some time.
His remarks appeared to contrast with the more dovish message delivered by ECB President Christine Lagarde earlier in the week.
ING analyst Francesco Pesole said Lane’s comments likely reflected the current position of the ECB Governing Council. He also expects more policymakers to express concerns about persistent inflation.
Federal Reserve Comments Support the Dollar
The U.S. dollar received additional support from hawkish comments by Federal Reserve official Austan Goolsbee.
Goolsbee said inflation remained too high and was moving in the wrong direction.
ING said it remained cautious about predicting the end of the dollar rally. Although the bank does not yet see the move as the beginning of a new long-term bullish cycle, it believes near-term momentum remains positive.
EUR/USD Could Test the 1.130 Level
Pesole warned that EUR/USD could test 1.130 in the near future if pressure on the euro continues.
However, the currency pair was already trading approximately 1% below ING’s estimated fair value.
ING expects EUR/USD to recover once investors begin reducing expectations for a more hawkish Federal Reserve policy.
