FX round-up: Sterling falls amid steady Spring Budget; all eyes on ECB and Fed

Sterling put in a mixed performance Wednesday as it fell against a rising US dollar on Fed Reserve rate-hike expectations for next week, but was steady after UK Chancellor Philip Hammond's no-real-surprises Spring Budget this afternoon.

At about 16:55 GMT, sterling was down 0.36% to $1.2156, and down 0.2% to €1.1524. The dollar-spot index was up 0.27% to $102.080.

Neil Wilson, senior market analyst at ETX Capital, said sterling was unmoved, holding at seven-week lows as there was nothing -- barring a few quips -- in 'Spreadsheet Phil's' red-box soapbox to drive demand.

Hammond's red-box soapbox saw UK's GDP growth forecast for 2017 upped to 2.0%, from 1.4% previously, with the budget deficit cut by £16.4bn to £51.7bn.

"As you would expect, there was plenty of pro-business stuff in there (the Budget) and growth for 2017 was revised higher, in line with other forecasts."

Exceptions were tweaks to self-employed National Insurance contributions and a drop in tax-free dividend allowance aside.

"The pound remains hamstrung by ongoing uncertainty over Brexit following the (second) bloody nose delivered by the Lords (on Tuesday)," said Wilson, referring to the amendment seeking a parliamentary vote on the final terms for quitting the EU.

"Until we get more certainty the pressure will remain on the pound." It was a view shared by several other market watchers, many of whom are now focused on a congregation of newsflow at the back end of this week.

European Central Bank's meet on Thursday will be closely watched, although expectations are for a dovish stance from the single-currency bloc's monetary authority.

Also the Fed meets next week, and the market -- on the back of perceived hawkish comments from various central bank officials, including chair Janet Yellen -- is looking for a rate hike.

The stances taken by both the ECB and Fed may well produce flutters in the GBPEUR and GBPUSD pairs, but the devil will, naturally, be in the jawboning detail.

Meantime, on Wednesday, sterling made mostly mild gains against commodity currencies the aussie, loonie, kiwi and ran, and also went for a trot higher on the yen.

The greenback was higher on pretty much all key crosses, booking gains against the commodity currencies, yen, and euro. Gold, which often moves contrary to the dollar, was softer.

"A healthy jump in US employment boosted the US dollar but also enlivened US equity markets in the early part of Wednesday’s afternoon session," said IG's Chris Beauchamp.

"Ahead of non-farm payrolls on Friday, the private ADP figure showed growth of 298,000, well ahead of expectations," said chief-market analyst Beauchamp.

"The market is racing to revise expectations about (the) Fed tightening -- barring a nasty surprise on jobs on Friday, March is all but a certainty," he added.

Beauchamp said the market appeared to have priced in hikes for all other Fed meetings this year, which raised the spectre of their being disappointed.

This was "especially if the Fed's rhetoric is not as rosy as expected," he said.