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FX round-up: Sterling, dollar lower as markets anticipate FOMC minutes

By Andrew Schonberg

Date: Wednesday 22 Feb 2017

FX round-up: Sterling, dollar lower as markets anticipate FOMC minutes

(ShareCast News) - Sterling was mostly lower Wednesday as mixed UK economic data reinvigorated Brexit nerves in the market, with investors' attentions now on the Federal Open Market Committee (FOMC) minutes due out at 19:00 GMT.
At 17:20 GMT, sterling was down 0.24% to $1.2443, and down 0.48% to €1.1781. The dollar-spot index was flat at $101.370.

Sterling also retreated against the aussie, kiwi, rand and yen, but made a minor gain on the loonie.

FXTM research analyst Lukman Otunuga said sterling found itself exposed to steep losses after mixed UK economic data revived some Brexit anxieties.

Office for National Statistics data revealed UK gross domestic product grew 0.7% in Q4 2016, up a touch from the estimate of 0.6% growth at the end of last month.

However, for 2016 growth was 1.8% higher than the year before, revised down by 0.2 percentage points from the 'flash' estimate.

"Sterling remains heavily influenced by the Brexit developments with further weakness expected as uncertainty haunts investor attraction towards the currency," Otunuga added.

Joshua Mahony, market analyst at IG, said focus was now on the US, where the release of the latest FOMC monetary policy minutes were sure to push the dollar back into the limelight.

The dollar was lower against the euro, aussie, dollar, rand and yen, but like sterling eked out a rise against the loonie.

"(Fed chair) Janet Yellen's appearance in Washington went a long way to determining a market position over when we will see the Fed act, raising the option-derived probability of a March hike," said Mahony in a statement.

"The big question is whether Trump's initial actions and promises have shifted market estimates, with some members being open to a hawkish shift in the event of a upward shift in UK growth projections."

Otunuga added that the improving sentiment towards the US economy, prospects of higher US rates and the relentless 'Trump effect' had made the dollar king again.

He opined that the FOMC minutes had the ability to fuel the current bull rally or potentially limit gains.

"If the FOMC minutes are in harmony with the recent hawkish comments from Fed official, then the Greenback may be installed with further inspiration to trade (the dollar-spot index) towards $102.00."

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