If buyers come in on the first test of this level then look for them to take a run at the multi-month high at 104.799. If sellers drive the index through the 200-day MA then 103.144 becomes the next downside target.

Economic Data Adds to Rate Uncertainty

The dollar initially gained on robust private payroll data, with ADP reporting an unexpected surge in October hiring, despite potential disruptions from strikes and hurricanes. This resilience in the labor market has led traders to delay bets on Fed rate cuts. However, separate data showed that third-quarter GDP growth slowed to 2.8% annually, below the anticipated 3%, softening earlier dollar gains and prompting a mixed outlook on Fed policy.

Pepperstone’s Michael Brown commented that this data “reaffirms that the U.S. is indeed still on course for a ‘soft landing’ as growth remains resilient.” However, the Fed’s path remains unclear, with traders looking to Thursday’s PCE inflation data for further direction.

Sterling Pressured by U.K. Budget Impact on Bond Yields

The British pound fell 0.42% to $1.2961 after briefly reaching a nine-day high. U.K. Chancellor Rachel Reeves presented the Labour government’s first budget on Wednesday, emphasizing fiscal discipline and public finance stability. The budget’s goal is to maintain investor confidence, especially following the market turmoil from Liz Truss’ tax-cutting policies in 2022.

Jane Foley, Rabobank’s head of FX strategy, noted that “for Chancellor Reeves, PM Starmer, gilts, the pound, and the entire U.K. economy, there is potentially a huge amount resting on this budget.” The British bond yields’ pullback added pressure on sterling as the government’s cautious fiscal strategy unfolded.

Euro Holds Steady as Traders Weigh German Growth Data

The euro traded flat at $1.0814, swayed by stronger-than-expected German growth and inflation data. German indicators temporarily lifted the euro, reducing odds of a substantial rate cut by the European Central Bank in December. Additionally, third-quarter eurozone GDP growth came in at 0.4%, slightly above expectations, which initially supported the euro before U.S. payroll data tempered gains.



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