Sterling fell for the first time in a week on Wednesday as a stronger US dollar gained support from rising Treasury yields ahead of key labor market data, while investors awaited comments from new Federal Reserve Chair Kevin Warsh.

The pound slipped 0.23% to $1.3234 after advancing in each of the previous four sessions, its longest daily winning streak in a month.

Sterling ended June down 0.2%, extending its decline in the first half of the year to 1.6%, marking its weakest start to a year since 2022, when it fell nearly 10% between January and June.

Political uncertainty has also added to investor concerns. With Labour Prime Minister Keir Starmer preparing to step down, markets are questioning whether leading contender Andy Burnham can revive the British economy without placing additional strain on already stretched public finances.

The dollar’s resurgence, supported by the strength of the US economy and equity markets, has been a major factor weighing on sterling and other currencies.

Against the euro, however, sterling performed better during the second quarter, gaining 1.4% and trading near its strongest level since last August.

UK rate expectations shift

Expectations for additional Bank of England rate hikes this year have eased since tensions in the Gulf began to subside, allowing oil prices to retreat toward pre-war levels.

Money markets currently assign a 90% probability that the Bank of England will raise interest rates before year-end, compared with earlier expectations that had priced in as many as three rate increases.

The Bank of England is scheduled to meet later this month to discuss monetary policy, although economists broadly expect interest rates to remain unchanged.

US jobs data in focus

Among the most important events for currency markets this week, including sterling, is Thursday’s US employment report, which could either reinforce or challenge growing expectations that the Federal Reserve may raise interest rates again in the coming months.

Central bank governors from around the world are gathering this week in Sintra, Portugal, for the European Central Bank’s annual forum.

Federal Reserve Chair Kevin Warsh will participate in one of the forum’s sessions before delivering remarks on Wednesday.

Given his preference for concise communication and limited public commentary from Federal Reserve officials, investors will closely scrutinize his remarks for clues about the future path of US interest rates.

Bank of England Governor Andrew Bailey is also scheduled to speak on Wednesday.

“Andrew Bailey may be the person to watch,” said David Stritch, strategist at Caxton. “The Bank of England is currently the most balanced among major central banks in terms of policy direction, and so far Bailey has remained largely vague about the future path of policy.”

Gold prices declined in European trading on Wednesday, extending losses for a third consecutive session and trading below the $4,000-per-ounce threshold near a seven-month low, pressured by continued strength in the US dollar against a basket of major currencies.

Markets are closely watching remarks from Federal Reserve Chair Kevin Warsh later today at the European Central Bank Forum in Sintra, along with additional key US labor market data, as investors reassess expectations for US interest rate hikes this year.

The Price

• Gold prices fell 1.2% to $3,960.53 per ounce, down from an opening level of $4,007.41. The session high was recorded at $4,018.53.

• At Tuesday’s settlement, gold lost 0.25%, marking a second consecutive daily decline. The metal also touched a seven-month low of $3,942.55 per ounce as rising US Treasury yields weighed on demand.

• Gold declined 11.75% during June, marking a fourth consecutive monthly loss and its steepest monthly decline since October 2008, driven by mounting selling pressure linked to increasingly hawkish Federal Reserve expectations.

US Dollar

The US Dollar Index rose 0.25% on Wednesday, extending gains for a second straight session and reflecting continued strength in the greenback against a basket of global currencies.

As is typically the case, a stronger dollar makes dollar-denominated gold less attractive for holders of other currencies.

The US currency has received additional support from the recent rise in long-term Treasury yields, particularly after positive labor market data reinforced expectations that the Federal Reserve could raise interest rates at least once more this year.

US interest rates

• Cleveland Federal Reserve President Beth Hammack said on Tuesday that she could still support additional rate hikes if inflationary pressures fail to ease.

• According to the CME FedWatch Tool, markets currently assign a 66% probability that the Federal Reserve will leave interest rates unchanged at its July meeting, while the probability of a 25-basis-point rate hike stands at 34%.

• For December, markets price a 17% probability of rates remaining unchanged and an 83% probability of a 25-basis-point increase.

Kevin Warsh

At 13:00 GMT, Federal Reserve Chair Kevin Warsh is scheduled to deliver an important speech at the European Central Bank Forum in Sintra, Portugal.

US labor market

Investors are also awaiting additional key US labor market data. ADP private-sector employment figures for June are due later today, followed on Thursday by weekly jobless claims and the official nonfarm payrolls report.

Outlook for gold

Market strategist Ilya Spivak said: “It appears that rising yields are the main force driving gold lower. The US dollar has also strengthened at the same time, which reinforces that view.”

SPDR Gold Trust

Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, were unchanged on Tuesday for a second consecutive session, leaving total holdings at 1,005.08 metric tons, the lowest level since September 24, 2025.

The euro remained under pressure against a basket of major currencies during European trading on Wednesday, extending losses for a second consecutive session against the US dollar as the greenback continued to benefit from rising US Treasury yields ahead of a closely watched speech by Federal Reserve Chair Kevin Warsh.

Investors are also awaiting key eurozone inflation data later today, along with remarks from European Central Bank President Christine Lagarde at the ECB’s annual Sintra Forum in Portugal, as markets look for fresh clues on the outlook for European interest rates.

The Price

• The euro fell around 0.2% against the US dollar to $1.1402, down from an opening level of $1.1421. The session high was recorded at $1.1423.

• The single currency closed Tuesday down less than 0.1% against the dollar, marking its first daily decline in four sessions, pressured by rising yields on US 10-year Treasury notes.

US Dollar

The US Dollar Index gained 0.2% on Wednesday, extending its advance for a second straight session and reflecting continued strength in the greenback against a basket of global currencies.

The dollar has received support from the recent rise in long-term US Treasury yields, particularly after positive US labor market data reinforced expectations that the Federal Reserve could raise interest rates at least once more this year.

Global markets are now closely watching comments from Federal Reserve Chair Kevin Warsh later today at the European Central Bank Forum in Sintra, Portugal, for further guidance on the outlook for US monetary policy.

European interest rates

• Reports suggest the European Central Bank is considering pausing its policy normalization process in July if energy prices remain near current levels.

• Money markets continue to price roughly a 30% probability of a 25-basis-point ECB rate hike in July.

Eurozone inflation

To reassess expectations for additional ECB tightening this year, investors are awaiting the release of June inflation data for the eurozone later today.

The figures will provide an updated picture of inflationary pressures facing policymakers at the European Central Bank.

The eurozone annual Consumer Price Index is due at 09:00 GMT. Market forecasts point to annual inflation easing to 3.0% in June from 3.2% in May, while core inflation is expected to slow to 2.5% from 2.6% previously.

Christine Lagarde

At 13:00 GMT, ECB President Christine Lagarde is scheduled to deliver an important speech at the European Central Bank Forum on Central Banking in Sintra, Portugal.

Markets will be looking for additional insights into inflation trends across the eurozone and the ECB’s view on the future path of interest rates this year.

Outlook for the euro

At Economies.com, we believe that if inflation data comes in softer than expected and Christine Lagarde delivers less hawkish remarks, expectations for another ECB rate hike this year could weaken further, potentially leading to additional losses for the euro against a basket of global currencies.

The Japanese yen weakened against a basket of major and minor currencies during Asian trading on Wednesday, extending losses for a third consecutive session against the US dollar and falling to its lowest level since 1986, as concerns over the widening gap in long-term bond yields between Japan and the United States continued to weigh on the currency.

The yen’s slide to fresh four-decade lows has intensified speculation that Japanese authorities could step into the foreign exchange market to support the currency. Traders increasingly believe any intervention could take place during the upcoming US market holiday on Friday, when thinner liquidity conditions may amplify its impact.

The Price

• The US dollar rose 0.2% against the Japanese yen to ¥162.84, the highest level since December 1986, after opening at ¥162.52. The session low was recorded at ¥162.49.

• The yen closed Tuesday down 0.35% against the dollar, marking its second consecutive daily decline, pressured by rising yields on US 10-year Treasury notes.

• Over the course of June, the yen lost 2.1% against the US dollar, posting a second straight monthly decline as markets continued to react to the Federal Reserve’s hawkish outlook.

US Dollar

The US Dollar Index climbed 0.2% on Wednesday, holding onto gains for a second consecutive session and reflecting continued strength in the greenback against a basket of global currencies.

The dollar has been supported by the recent rise in long-term US Treasury yields, particularly after key labor market data reinforced expectations that the Federal Reserve could raise interest rates at least once more this year.

Markets are now closely watching comments later today from Federal Reserve Chair Kevin Warsh at the European Central Bank Forum in Sintra, Portugal, for further clues on the outlook for US monetary policy.

Japanese authorities

Japanese Finance Minister Satsuki Katayama reiterated that the government is prepared to take appropriate action against excessive currency volatility.

Katayama added that this includes decisive measures agreed upon between Japan and the United States.

Market views

• Chidu Narayanan, head of Asia-Pacific macro strategy at Wells Fargo, said another intervention remains a possibility: “We believe we are approaching a point where action becomes increasingly likely.”

• Narayanan added that current levels are critical, not necessarily because of a specific exchange rate target, but because authorities may need to intervene to maintain credibility.

• Traders view Friday’s US holiday as a potential opportunity for Japanese authorities to buy yen, as lower liquidity could magnify the impact of any intervention and reduce its overall cost.

• Matt Simpson, senior market analyst at StoneX, said Japan’s Ministry of Finance may want to intervene but faces a difficult challenge while fighting against a hawkish Federal Reserve backdrop.

• Simpson added that if upcoming US economic data unexpectedly weakens and boosts expectations for monetary easing, Japanese authorities could take advantage of a softer dollar environment to intervene more aggressively. Until then, intervention threats are likely to remain largely verbal.

Japanese interest rates

• Market pricing for a 25-basis-point interest rate hike by the Bank of Japan at its July meeting remains below 25%.

• Investors are awaiting additional data on inflation, wages, and unemployment in Japan to reassess the likelihood of further policy tightening.