FX round-up: Sterling, dollar polarised barring hefty rand gains

Sterling and the US dollar turned in largely polarised performances today, barring hefty mutual gains on the rand, as traders look to next week's US Federal Reserve, Bank of England and Bank of Japan policy meetings.

At 16:30 BST, sterling was down 0.75% to $1.4349, and was down 0.59% to €1.2701. The British unit fell against most commodity currencies, whereas the greenback steamed ahead.

South Africa's rand dived as global growth concerns and lower commodity prices weighed heavily, with the lingering rattle from yesterday's first-quarter economic contraction there acting as ballast, too.

The dollar was up 2.24% to 15.1354 rand, whereas sterling stacked on 1.4% to 21.7043 rand. South Africa has just dodged several ratings-agency downgrades to sub-investment grade, which had given the currency a boost.

Against this backcloth, at 16:39 BST West Texas Intermediate was down 2.04% to $49.53 a barrel and Brent was lower 2.21% at $50.80, both due to a firmer dollar against sterling and the euro. Gold was steady at $1272 an ounce.

Sterling's weakness -- little relieved by today's above-forecast figures on UK construction output for April -- continued to be driven by pronounced market nerves ahead of Britain's 23 June in-out European Union referendum.

"Brexit (out vote) concerns have intensified over the past week, with polls very close, and this was clearly reflected in falling interest-rate expectations and consequently sterling," said Capital Economics's assistant economist Oliver Jones.

"But despite 10-year (UK) gilt yields hitting an all-time low, there's actually little sign of a Brexit effect in bond and equity markets," he said.

BoE is widely seen as holding rates, while the jury is out on the Fed but a July and potentially even September rise now seem more likely. Bank of Japan is also expected to take a pass on moving its benchmark rate.

IHS Global Insight's chief UK and European economist, Howard Archer, was one of many who believed BoE's policymakers were "in large part a hostage" to the outcome of the EU vote, and said the market's focus next week would be on any comment related to a Brexit scenario.

Meantime, stateside, Danske Bank believed markets would be focusing on the Fed's remarks as last week's shock US non-farm payrolls data had effectively taken a summer rate hike off the table.

At 16:30 BST, the dollar-spot index was up 0.33% to $94.263. University of Michigan's consumer confidence index for start-June slipped to 94.3 from 94.7, above expectations.

Finally, Russia's central bank cut its main policy rate to 10.5%, from 11.0%, with officials referencing greater confidence in the outlook for inflation and slower price growth as the main reasons behind their decision.