FX round-up: Sterling manages minor gains on dollar, constrained by Brexit concerns
(ShareCast News) - Sterling managed minor gains against the US dollar on Monday, these likely constrained longer term by Brexit concerns, but faltered against a basket of commodity currencies.
At about 17:04 BST, sterling was up 0.2% to $1.2916, while the dollar-spot index was down 0.37% to $98.882.
"The domestic schedule heats up over the course of the week, with the monthly official updates on consumer price inflation (Tuesday), labour market data (Wednesday) and retail sales (Thursday)," said Chris Saint, senior analyst at HL Currency Service.
"Taken in combination, markets will be looking for further confirmation that consumers are reining back spending as rising inflation puts the squeeze on real income gains."
FXTM research analyst Lukman Otunuga added that sterling's rise on the dollar felt more technical than fundamental.
"Uncertainty over Brexit should limit gains in the medium to longer-term," said Otunuga.
"Sterling bears still have a shot to attack, especially when considering that the threat of Brexit negatively impacting the UK economy has encouraged the Bank of England to maintain a dovish stance," he added.
The BoE has already trimmed its prediction for growth this year amid the Brexit uncertainty, while rising levels of inflation and sluggish wage continued to dent consumer confidence.
"With consumer spending likely to face a squeeze amid the accelerating inflation and vulnerable Sterling, the GBPUSD still remains exposed to downside risks."
Meantime, sterling was also down on a euro benefiting from a blend of reduced political risk and a stronger economy in Europe, and doubts about US President Donald Trump.
"Data from the CFTC shows positioning in the futures market turned net bullish for the first time in three years last week," said Saint in a statement.
Sterling was also down on the commodity currencies the aussie, loonie, kiwi and rand.
Turning to the dollar, it and sterling advanced on the yen, but the greenback was firmly southbound on the euro, aussie, loonie, kiwi and rand.
"Dollar weakness continues to support precious metals, and commodity prices in general, with the two-day bounce in gold prices turning into a three-day rally," said IG's Chris Beauchamp.
"This isn't a rush to safe-havens yet, but the downturn in US data is probably causing more than a few investors to rethink their assumptions about growth," he said.
Monex Europe continued: "For now the Federal Reserve seems fairly confident the current slowdown in US economic activity, wage growth and inflation is a blip -- although another month of poor data releases would test this optimism."