Sterling weakened against the dollar on Wednesday as traders positioned for a Federal Reserve rate decision and a UK budget statement due the same day, with a firmer greenback pressing European currencies broadly.

The pound was down 0.18% at $1.3283 as of 06:17 ET (10:17 GMT), while the euro traded nearly flat at $1.1125, hovering close to its weakest levels of the year. The dollar index edged back toward its annual highs near 102.35, according to HSBC data.

Easing concerns about an AI-driven equity selloff helped markets return their attention to themes that support the dollar, after strong third-quarter results from SK Hynix lifted Nasdaq futures 0.6%. “A little stability on the AI side has allowed the FX market to re-focus on the clearer and more present danger of higher energy, higher inflation and the central bank response,” said Chris Turner, global head of markets at ING.

Turner said a break through 102.50 on the dollar index “opens up 103.00.” The Fed wraps up its policy meeting later on Wednesday, with ING expecting Chair Kevin Warsh to keep the message tilted toward restoring monetary stability, a stance the bank sees as hawkish and supportive of the dollar. Turner said Warsh likely “will not want to tie himself in knots by citing a tightening in financial conditions,” having “learnt from the unruly market response to his press conference in July.”

The Bank of Canada also sets rates Wednesday, and Alphabet and Microsoft report earnings after the U.S. close.

In the UK, ING does not expect the budget to carry “too much say” on the Bank of England’s tightening prospects, though an unexpected change to minimum wage settings could feed through to money markets. ING rates strategist Michiel Tukker estimates a 20 basis point risk premium in 10-year gilt yields, part of which could unwind. Turner noted the UK “looks to be one of the few G7 economies heading in the right fiscal direction into 2027.”

Markets are pricing a 25 basis point Bank of England hike to 4% in November. Reports over the weekend suggested Chancellor John Healey may add about £20 billion ($26.6 billion) in investment over five years, removing a major downside risk, though past budgets have delivered larger surprises than anticipated.

The euro remained under pressure from broad dollar strength and an unresolved French budget crisis. The European Central Bank’s lending survey showed tighter conditions and an unexpected decline in corporate loan demand ahead of Thursday’s press conference. “It may be too early for the ECB to pour cold water on market tightening expectations,” Turner said, “but the risks look to be building in that direction.”

He described the 1.1065/1.1110 area as “quite important support,” below which technical analysts “will be dusting off targets at 1.0880.” HSBC puts support at 1.1066 and resistance at 1.1223. Euro/sterling held above 0.8350, a level Turner called “looks heavy,” with 0.8315 the next area to watch.

ING sees EUR/USD at risk of testing 1.0880 if support gives way, with Turner saying the reasons for a bounce “are conspicuous by their absence.” A dovish ECB shift, a hawkish upside surprise in the UK budget, or a Fed that acknowledges tighter financial conditions would challenge that view. An LSEG consensus cited by HSBC sees EUR/USD at 1.14 and GBP/USD at 1.33 by the end of 2026.

LevelGBP/USDEUR/USDSpot (06:17 ET)$1.3283$1.1125HSBC support$1.31751.1066HSBC resistance$1.34611.1223LSEG end-2026 consensus$1.331.14

Note: Spot figures reflect Wednesday trading; support and resistance levels are from HSBC; the 2026 forecasts are an LSEG consensus cited by HSBC.

For sterling, the twin events leave the currency exposed to two-way risk. A less hawkish Fed or a budget surprise would test the pound’s pricing, while a firm dollar and steady AI sentiment keep the near-term bias lower. For euro traders, a break below $1.110 or wider French spreads would undercut the view that the single currency holds its recent floor.