Sterling edged up to a seven month high against the dollar on Tuesday, cementing recent gains as traders shrugged off weak economic growth data and kept an eye on the final days of campaigning before Britain’s general election.
Investors have ramped up their bets in recent days that the governing Conservative Party would win a majority in the election on Thursday, although political pundits are far more cautious.
Sterling held most of those gains even though data showed Britain’s economy grew at its slowest annual pace in nearly seven years in October, just 0.7%.
Industrial output fell by 0.7% in the three months to October and the services sector grew by 0.2%, its weakest increase since June, the data showed.
The dollar slipped as continued uncertainty about the outlook for US-China trade talks kept large moves in the FX market in check.
Currency market moves on Tuesday were fairly muted as investors awaited developments from central bank meetings in the United States and Europe and as a 15th December deadline for the next wave of U.S. tariffs on Chinese goods fed caution in global markets.
Investors are almost certain the Federal Reserve will leave rates unchanged when its two-day meeting ends on Wednesday, while the European Central Bank is likewise expected to keep interest rates steady on Thursday.
Euro gained on Tuesday after a better-than-expected German economic sentiment survey boosted the common currency.
The euro was higher after the ZEW research institute’s monthly index on economic morale among German investors showed the mood improved far more than forecast in December, with an unexpected rise in October exports boosting hopes for an upturn in Europe’s biggest economy.
13.30 – USD: CPI MoM; Forecast at 0.2% against previous of 0.4%.
13.30 – USD: Core CPI MoM; Forecast same as previous at 0.2%.
19.00 – USD: FOMC Economic Projections.
19.00 – USD: Federal Funds Rate; Forecast to stay the same at 1.75%.
19.30 – USD: FOMC Press Conference.