FX roundup: Sterling falls as Fed, BoE rate calls loom amid US election, Brexit worries

Sterling was lower on most key crosses on Tuesday afternoon with analysts holding mixed views on how much of this was linked to UK manufacturing data and at the same time keeping a wary eye on two central bank policy decisions this week.

A pall of caution is blanketing the crosses ahead of the US Federal Reserve issuing its interest-rate call on Wednesday, followed by Bank of England on Thursday.

Both central banks are expected to retain their current positions against a backcloth of Brexit and US election uncertainties.

At about 17:02 GMT, sterling was up 0.07% to $1.2250, but fell 0.65% to €1.1078. The dollar-spot index eased 0.63% to $97.828.

Jasper Lawler, market analyst at CMC Markets, said sterling lost most of its early gains after UK's manufacturing PMI for October came in at 54.3, an ace below views and down from September.

However, Chris Saint, senior analyst at Hargreaves Lansdown, noted the British unit gave little reaction to today's UK manufacturing PMI data.

Sterling had been on the up since Monday afternoon when BoE governor Mark Carney confirmed he would remain at the helm of the UK central bank for an extra year until June 2019.

"Uncertain times lie ahead and news that Mr Carney should be around to see out the full two-year period of Brexit negotiations removes one strand of uncertainty," said Saint.

Against this fabric, sterling limped lower against the Canadian, New Zealand and Japan units.

It also fell against the Australian dollar after Reserve Bank of Australia left rates on hold overnight and gave no clear sign of another cut being in the offing.

Meantime, the dollar was lower on most crosses, retreating versus the euro, aussie, loonie, kiwi and yen.

Lawler pinned this to "rising election uncertainty and nerves" before the Fed's rate call, which comes amid an acrimonious campaign between Donald Trump and Hilary Clinton for the US presidency.

Stateside, Markit’s final manufacturing PMI came in at 53.4 in October, up from an initial reading 53.2 and 51.5 in September.

The ISM's headline manufacturing index rose to 51.9 from 51.5 in September, beating forecasts for a reading of 51.7.

In contrast, US construction spending fell 0.4% in September on the month to a seasonally-adjusted $1.15bn, the Commerce Department said. It missed views for a 0.5% fall.

Finally, both the dollar and sterling shone against the rand. At about 17:02 GMT, the greenback was up 0.99% to 13.6078 rand and sterling was up 1.01% to 16.6608 rand.

South Africa's unit rose firmly on Monday after allegations of fraud against finance minister Pravin Gordhan were dropped.

On Tuesday, the rand's slide came as traders' cheer evaporated and they cast a steely eye towards South Africa's poor credit rating and a looming rating appraisal of its debt.