FX round-up: Rabobank calls dollar/yen lower

Cable was a smidgen higher despite a labour market report of November which economists characterised as showing "resilience" but perhaps also the first cracks in hiring trends.

As of 0851 GMT the pound was up by 0.31% to 1.2692.

Unemployment in the UK remained at 4.8% during the the three months ending in October - its lowest since July 2005 - while average weekly earnings accelerated, rising at a 2.6% year-on-year clip over that same time frame, as expected, but nonetheless up from 2.4% in the month before.

However, employment fell for second consecutive month and for only the second time in eight months.

That led economists at Barclays to tell clients: "some cracks could potentially be appearing [...] We expect the referendum outcome to push up unemployment only gradually, likely at the turn of the year, and for consumers’ purchasing power to deteriorate over 2017 as CPI continues its ascent, thus forcing households to be more prudent and reduce private consumption over 2017."

Acting as a backdrop, the US greenback was generally on its backfoot as traders bid their time ahead of the US central bank´s policy announcement due out later in the day.

Euro/dollar was up 0.24% to 1.0645 and dollar/yen was rising 0.14% to 115.32.

Commenting on the latter, Jane Foley, Senior FX strategist at Rabobank cautioned clients that despite all the uncertainty around newly elected US president Donald Trump interest rate differentials continued to be a key driver of exchange rates.

In that regard, her forecast was for just one more interest rate hike out of the Fed in 2017 - not two.

"This view implies that US yields could again correct lower in 2017 and that the USD could also soften. On this view USD/JPY may also trade lower next year back towards the 110.00 area. The tone taken by Fed Chair Yellen this evening has the capacity to either make or break this outlook."