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FX round-up: Sterling clings to narrow channels as Czech koruna surprises

By Andrew Schonberg

Date: Thursday 06 Apr 2017

FX round-up: Sterling clings to narrow channels as Czech koruna surprises

(ShareCast News) - Sterling clung to relatively narrow trading channels as traders look for details out of a summit between Donald Trump and Xi Jinping, the presidents of the US and China, as the Czech koruna emerged as a surprise forex figure on Thursday.
At about 17:07 GMT, sterling was up just 0.01% to $1.2484, and up 0.14% to €1.1723. The dollar-spot index was up 0.11% to 100.670.

Chris Saint, senior analyst at HL Currency Service, said sterling had settled into relatively narrow trading channels against the euro and US dollar over the past 24hrs.

It was "generally hugging close to the €1.17 and $1.25 levels," he said.

Investors and traders were scanning for details out of the two-day Trump-Xi summit in Florida, with safe-haven gold benefiting as they pondered the tone and outcome of the get-together.

"If Trump decides to play hardball and maintains his harsh rhetoric on China, then risk aversion may intensify consequently sending investor's rushing towards safe-haven assets," said Lukman Otunuga, research analyst at FXTM.

This was after the US Federal Open Market Committee surprised with a hawkish tone in its minutes last night. Markets were digesting news the US central bank was ready to start cutting its balance sheet before the end of the year.

Meanwhile, Michael Hewson, chief market analyst at CMC Markets UK, said the euro had shrugged off dovish commentary from European Central Bank President Mario Draghi who dialled back from the rather hawkish interpretation of the most recent ECB meeting.

He pledged to keep rates low and to keep monetary policy on its current path.

"His comments on wages would appear to suggest that the ECB will remain in no hurry to move while wage growth remains weak," said Hewson. "This isn't likely to change given the still high levels of unemployment in certain parts of the euro area."

Sterling was up on the aussie and yen, but fell against the loonie, kiwi and the besieged-all-week rand after President Jacob Zuma's surprise cabinet reshuffle.

Turning to the US dollar, Saint of HL Currency Service said the greenback had weakened slightly after the release last night of the FOMC minutes from its March meeting.

Aside from the Trump-Xi summit, the next dollar-sensitive data set was the US non-farm payrolls numbers, which were due out on Friday.

"If the Trump-Xi conflab does somehow fail to produce anything of interest then there is still tomorrow's non-farm jobs figures to spark some excitement," said SpreadEx financial analyst Connor Campbell. He said that report was arguably growing in importance after the FOMC minutes.

Finally, the Czech National Bank has scrapped the cap on the country's koruna currency, which flew higher as the central bank ended a 3-1/2-year pledge to keep the unit weak.

"We will let the dust settle before revisiting our forecasts, but as things stand we think the 'fair value' of the currency is around 25.5/€ and we expect it to settle around that level by year-end," said William Jackson, senior emerging markets economist at Capital Economics.

At about 17:07 GMT, the euro was down 1.45% to 26.650 Czech koruna, sterling was down 1.38% to 31.2168 koruna, with the dollar down 1.37% to 25.0113 koruna.

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