Dollar Strengthens as Pound and Yen Slide; Payrolls Report in Focus
The British pound and Japanese yen slumped on Tuesday as growing fiscal concerns pushed investors toward the U.S. dollar. Traders are now focused on Friday’s U.S. nonfarm payrolls report for fresh signals on the dollar’s direction.
Bond market pressure spilled into currencies, with Britain’s 30-year borrowing costs climbing to their highest since 1998. Gold also hit a new record before easing.
“Negative developments outside of the U.S. are driving today’s dollar strength,” said Vassili Serebriakov, FX strategist at UBS in New York.
Pound and Yen Under Pressure
Sterling dropped to a three-and-a-half week low, down 1.07% at $1.3398. The dollar also climbed 0.73% to 148.25 yen, marking its strongest level against the Japanese currency since early August. The euro slipped 0.43% to $1.1659.
The pound was weighed down by concerns over the U.K.’s fiscal outlook ahead of the autumn budget, where finance minister Rachel Reeves is expected to raise taxes to meet fiscal targets. Analysts warned that higher taxes could further strain growth.
For the yen, political uncertainty and dovish comments from Bank of Japan Deputy Governor Ryozo Himino pressured the currency. The resignation of a senior ruling party official also added to the weakness.
U.S. Jobs Data and Fed Outlook
The dollar drew support from higher Treasury yields as global bond markets sold off. Markets are watching Friday’s payrolls data closely, with money markets pricing in a 91% chance of a 25-basis-point Fed rate cut this month, according to CME FedWatch.
Concerns about the Federal Reserve’s independence remain in play after President Donald Trump pushed for faster rate cuts and dismissed Fed Governor Lisa Cook over disputed fraud allegations.
Broader Market Moves
The euro zone reported inflation rising slightly in August but still close to the European Central Bank’s 2% target, reinforcing expectations that the ECB will keep rates steady.
Spot gold steadied after reaching an all-time high, last trading 0.47% higher at $3,492.19 an ounce.
