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FX round-up: Sterling dashes higher on UK services data, but falters against the euro

By Andrew Schonberg

Date: Thursday 04 May 2017

FX round-up: Sterling dashes higher on UK services data, but falters against the euro

(ShareCast News) - Sterling went for a dash higher on a string of key crosses thanks to better than expected UK services data, but faltered against an in-form euro.
The British currency was up 0.39% to $1.2917 at about 17:14 BST, but was down 0.47% to €1.1766.

A strong UK services purchasing-managers' index (PMI) early on Thursday helped sterling up, which in turn retarded the FTSE 100.

This followed better than predicted UK PMI data for construction and manufacturing this week, and after the US Federal Reserve held rates unmoved last night.

"Signs the UK economy is not down-and-out just yet has renewed interest in the British pound," said Jasper Lawler, senior market analyst at London Capital Group.

Lukman Otunuga, research analyst at FXTM, said sterling lazily strolled towards a higher close on the dollar on Thursday.

He cited the trinity of UK PMI in commenting that sterling could enjoy short-term support.

"With uncertainty still a dominant theme with regards to Brexit, investors may start to overlook the improving fundamentals with an increased focus on Brexit negotiations."

Traders across Europe and in the US remain very wary about a potential hard Brexit scenario, the state of relations between negotiating parties and the size of any EU-UK divorce bill.

"From a technical standpoint, the GBPUSD could appreciate towards $1.3000 if bulls maintain control above $1.2875," said Otunuga.

"In an alternative scenario, repeated weakness below $1.2875 should encourage a decline towards $1.2775." The pair was very sensitive to the UK general election and economic news.

Sterling's slip on the euro came as the latter rose on some strong services PMI data out of the single currency bloc.

It was also as pundits grew more confident centrist Emmanuel Macron would beat the far right's Marine Le Pen in the second round of France's presidential election.

Sterling rose on the loonie, kiwi, rand, yen and aussie, the latter, said Michael Hewson of CMC Markets UK, suffering after another weak Chinese PMI reading raised further concerns about demand for commodities there.

Meanwhile, the dollar-spot index was down 0.35% to $98.858, with the greenback succumbing to strength in the euro and yen, but gaining on the aussie, loonie, kiwi and rand.

"A relatively hawkish FOMC and US jobless claims falling to the lowest since April 2000 saw the dollar strengthen against the yen and commodity currencies," said Lawler.

"The important addition to the Fed's statement was where acknowledged slower first quarter growth and inflation but said both should be overlooked. Perhaps we're finally reaching a stage where and it's not such a data-dependent."

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