Sterling declined in European trade for the second straight session against dollar, hitting 37-year lows on economic recession concerns in the UK and doubts about the pace of policy tightening by the BoE this week. 

The dollar hit fresh 20-year highs against a basket of major rivals ahead of the Federal Reserve's policy decisions, expected to hike interest rates by 75 basis points. 

GBP/USD fell 0.6% on Wednesday to 1.1304, the lowest since 1985, after losing 0.4% yesterday, the third loss in a row as US treasury yields spiked to fresh highs. 

Recession 

Economists warned that the UK economy is already in a state of recession, after UK retail sales tumbled past estimates in August, an important indication for consumer health. 

Additionally, such a spate of negative data are casting doubt on the Bank of England's policy decisions this month, and whether it'll hike rates by 50 or 75 basis points. 

An aggressive move by the BoE would contradict a new budget by the UK government to support the economy and easy costs of living for citizens. 

The Dollar

The dollar index rallied over 0.6% on Wednesday for the second straight session, hitting 20-year highs at 110.87 against a basket of major rivals. 

Later today, the Federal Reserve will announce its policy decisions, expected fully to hike rates by 75 basis points to 3.25%, the third such increase in a row. 

And there's a 19% chance the Fed might actually raise rates by 100 basis points, heading for 4.5% by March 2023. 

Estimates

We expect the pound to keep weakening against the greenback, potentially giving up 1.13 for the first time since 1985 and heading for 1.12. 

US stock indices declined on Tuesday and extended the losses ahead of the Fed's policy decisions.

Later Today, the Federal Reserve will convene to discuss policies, and tomorrow, it's expected to decide on hiking interest rates by 75 basis points to 3.25%, the third such increase in a row.

Such a hike would come following recent US inflation data, with analysts now expecting a 100% chance of a 0.75% rate hike at least, and a 37% chance of a 1% rate hike.

US 10-year treasury yields surged 1.5% for another session to 11-year highs at 3.547%, bolstering dollar's standing against major rivals. 

Dow Jones fell 1.3%, or 400 points to 30,620, while S&P 500 declined 1.3%, or 51 points to 3,849, as NASDAQ fell 1% to 11,418. 

Dollar gained ground in European trade against a basket of major rivals on track for the first profit in three days as US treasury yields spike to fresh highs ahead of the Federal Reserve's policy meeting. 

The central bank is expected to raise interest rates by 75 basis points to 3.25%, the third such increase in a row in order to control runaway inflation. 

The Index

The dollar index rose 0.3% to 109.90, after falling 0.1% yesterday, the second loss in a row amid calm trading in the forex market. 

US Yields

US 10-year treasury yields surged 1.5% for another session to 11-year highs at 3.547%, bolstering dollar's standing against major rivals. 

US 2-year treasury yields rose 1.3 on track for the ninth profit in a row, hitting two-year highs at October 2007, and almost passing 4% for the first time in 25 years. 

Two-year treasury yields are the most sensitive to US monetary policy forecasts, and indicate a string of aggressive policy tightening by the Fed until March 2023. 

The Federal Reserve 

Later Today, the Federal Reserve will convene to discuss policies, and tomorrow, it's expected to decide on hiking interest rates by 75 basis points to 3.25%, the third such increase in a row.

Such a hike would come following recent US inflation data, with analysts now expecting a 100% chance of a 0.75% rate hike at least, and a 37% chance of a 1% rate hike.

Gold prices declined in European trade after a two-day hiatus from gains after rebounding from 29-month lows, amid ongoing pressures from higher US 10-year treasury yields. 

Such developments come ahead of the Federal Reserve's meeting, expected to raise interest rates by 75 basis points for the third meeting in a row. 

Gold Prices Today

Gold prices fell over 0.3% to $1,670 an ounce, after rising 0.1% yesterday away from 29-month lows at $1,654 an ounce. 

US Bonds

US 10-year treasury yields rose for the second session by 0.5%, almost hitting 11-year highs at 3.518%, scaled yesterday, in turn pressuring gold prices. 

Two-year treasury yields also rallied 0.8% on track for the ninth profit in a row, marking October 2007 highs at 3.973%, and almost passing 4% for the first time in 25 years. 

The Federal Reserve

Later Today, the Federal Reserve will convene to discuss policies, and tomorrow, it's expected to decide on hiking interest rates by 75 basis points to 3.25%, the third such increase in a row. 

Such a hike would come following recent US inflation data, with analysts now expecting a 100% chance of a 0.75% rate hike at least, and a 37% chance of a 1% rate hike. 

Global Central Banks 

Aside from Fed's meeting, other major central banks in Britain, Japan, and Switzerland are convening as well next Thursday.

It's unlikely the BoJ will change its current ultra-easy policies, while the Swiss central bank is expected to raise interest rates by 75 basis points to 0.5%.

Bank of England is also expected to increase interest rates, either by 50 or 75 basis points.

Estimates

Now analysts expect gold prices to hover near $1,680 an ounce in the short term, and potentially head for $1,600 after the Fed's policy decisions tomorrow. 

The SPDR

Gold holdings at the SPDR Gold Trust fell 2.9 tones yesterday to a total of 960.56 tones, the lowest since March 2020.