Investing.com — Sterling traded higher on Wednesday while the euro edged up, as stronger-than-expected UK growth and a pause in the dollar’s rally ahead of U.S. inflation and jobs data supported the pound. Prime Minister Andy Burnham separately said rejoining the EU was among options to be examined.
GBP/USD rose 0.31% to $1.3271, as of 05:20 ET (09:20 GMT). EUR/USD gained 0.11% to $1.1354.
The dollar jumped again on Tuesday despite soft U.S. data. “Rising back-end yields continue to weigh on global risk sentiment,” ING FX strategist Francesco Pesole said.
“The slump in long-dated bonds will keep heavily affecting FX. For now, it argues against any material dollar correction,” he said, adding it “may be premature to call the top in this dollar move.”
U.S. consumer confidence fell to 81.9 in September and August JOLTS job openings dropped to 7,079k, both missing consensus. October FOMC pricing fell 5 basis points to 12 bps. ING expects the Fed to hike next in December.
Today brings ADP payrolls and August PCE, with core PCE seen up 0.3% on the month. A 0.4% reading backed by firm jobs data “could lift the October hike pricing again close to 20bp,” Pesole said. No Fed speakers were named in the materials provided.
Britain’s economy grew 0.5% in the second quarter, beating a 0.4% forecast, the Office for National Statistics said, led by services and exports.
Government borrowing rose to 5.2% of GDP from 4.2%. Sterling’s gain was nearly triple the euro’s, though the pair remains well below its 52-week high of 1.3869.
Burnham told BBC Radio 4 the Brexit settlement had caused “more harm than good” and he wanted to “look at the options”: staying as is, a customs union, the single market, or “we could go all the way.”
The comments depart from his by-election pledge not to “re-run” Brexit arguments. Liberal Democrat leader Ed Davey said “talk is cheap,” while Reform UK’s Richard Tice accused Burnham of trying to “sneak us back into Brussels via the back door.” The materials do not link sterling’s move to the remarks.
EUR/USD broke below its summer lows on Tuesday, dropping to 1.1310-20 before paring losses. ING said the move “appears entirely dollar-driven,” despite dovish-leaning remarks from ECB President Christine Lagarde. French and German September CPI are due, and hotter readings, like Spain’s, could prompt hawkish ECB speakers, Pesole said.
