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FX round-up: Sterling edges up on dollar, euro ahead of BoE 'Super Thursday'

By Andrew Schonberg

Date: Wednesday 10 May 2017

FX round-up: Sterling edges up on dollar, euro ahead of BoE 'Super Thursday'

(ShareCast News) - Sterling made cautious gains on the dollar and euro ahead of its so-called 'Super Thursday' centred around the Bank of England tomorrow.
The UK central bank was widely expected to leave its core interest rate unchanged, as it issues quarterly forecasts, policymaker minutes and an inflation report.

Around 17:00 BST, sterling was up 0.02% to $1.2937 and up 0.03% to €1.1898. The dollar-spot index was down 0.06% to $99.596.

"Sterling exchange rates have generally kept to relatively tight trading ranges ahead of 'Super Thursday' tomorrow," said Chris Saint, senior analyst at HL Currency Service.

"For the time being, sterling has again failed to breach the psychological $1.30 barrier despite the dollar coming under a bit of pressure in the wake of President Trump's surprise decision to fire FBI Director James Comey," said Saint.

IG market analyst Joshua Mahony was another who noted the furore over Trump's sacking of Comey.

"Parallels have been drawn with the Nixon scandal, and should this unfold in a similar manner, we could be looking at one of the most incredible political episodes in the history of the United States," opined Mahony.

"Crucially for markets, as the chances of an impeachment hearing increase, so we will have to see the Trump trade unwind, raising the vulnerability of US stocks in particular," he said.

Sterling was also up on the yen, but fell against the rand, loonie, aussie and kiwi.

"We've seen strong rebounds in the New Zealand and Australian dollar," said Michael Hewson, chief market analyst of CMC Markets UK.

"That was always likely to happen at some point given the extent of recent declines in both, as well as a slightly firmer tone to commodity prices,"

He also said that any hint other BoE policymakers might be moving to the Kristin Forbes camp in arguing for a hike could see further squeezing in short positions for the pound.

Foenix Partners managing director Richard de Meo believed there was a "good chance" that one or two of Forbes' Monetary Policy Committee colleagues joining her in voting for a rate hike.

"Any such headlines would see a sharp sterling rally," said de Meo in a note.

Turning to the dollar, it was up on the yen and euro, but fell against the rand, loonie, aussie and kiwi.

Meanwhile, across the English Channel, European Central Bank chief Mario Draghi said incoming data confirmed the cyclical recovery of the euro area economy was becoming increasingly solid.

"Downside risks have further diminished," said Draghi, noting it was too early to declare success.

"Underlying inflation pressures continue to remain subdued and have yet to show a convincing upward trend," he said.

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