FX round-up: Sterling flat ahead of MPC, US jobs report

Sterling ended the day almost exactly flat ahead of the Monetary Policy Committee's policy decision on Thursday.

By the close, cable was ahead by just 0.01% to 1.3216.

That was despite Markit's UK manufacturing purchasing managers' index for July rebounding to 55.1 from 54.2 a month before, which was ahead of the consensus estimate of 54.5 albeit still below its average of the first half of the year of 55.3.

Following recent weak readings on economic activity in the UK and softer than anticipated inflation data, traders had bumped down their expectations for a hike in Bank Rate to roughly 40%, which was down from about 56% at June-end.

Nonetheless, recent more hawkish comments from Bank of England Governor Mark Carney himself and chief economist Andrew Haldane meant traders remained on their guard.

"The pound hit its highest mark versus the greenback since September 2016, and the positive run is showing no signs of running out of steam," said David Madden, market analyst at CMC Markets UK.

Acting as a backdrop, the greenback was ever so slightly higher on Tuesday, with the US dollar spot index rising 0.09% to 92.947 - a more than two-year low.

As in the UK, traders were also keeping their cards close to their chest ahead of data due out later in the week, in this case the monthly non-farm payrolls report which was scheduled for release on Friday.

Meanwhile, euro/dollar was on the backfoot, edging lower by 0.21% to 1.1816 after the Federal Labor Agency rpeorted that German unemployment declined by 9,000 in July (consensus: -5,000), with the rate of joblessness stuck at 5.7% - its lowest level since reunification.

Trading in dollar/yen was similarly muted, with the currency pair off by 0.08% to 110.16.