FX round-up: Sterling gains on dollar thanks to UK policy hawks coming to fore

Sterling managed Friday gains on the US dollar thanks to UK monetary policy hawks coming to the fore in recent days, but was otherwise down against a raft of commodity currencies.

At 17:25 BST, sterling was up 0.37% to $1.2729, and down 0.03% to €1.1368. It was lower on the aussie, loonie, kiwi and rand, but up on the yen.

"The GBP/USD continues to creep higher as the hawkish commentary from Bank of England members, Andy Haldane and Kristin Forbes in the past two days," said David Madden at CMC Markets UK.

Forbes, who was leaving the BoE at the end of this month, used her speech at the London Business School last night as an opportunity to voice her opinions on interest rates in the UK.

"The BoE shouldn't wait too late to lift off, is what Ms Forbes believes," said Madden.

"Haldane is of a similar view and he feels that keeping rates at these levels for too long will be a problem, as inflation is creeping higher."

Their opinions appeared to collide with that of BoE governor Mark Carney, whose stance was more dovish when it came to tightening monetary policy.

Craig Erlam at Oanda said traders appeared at ease with the recent hawkish turn.

"But with Andy Haldane voicing his concerns on inflation this week, perhaps they shouldn't be," said Erlam

"Still, even with recent gains, the pound remains range-bound against the dollar with 1.26 providing solid support below and 1.28 resistance above."

Even still the same risk factors that have dogged sterling relentlessly for the past year -- since the non-binding Brexit referendum -- remain in play, plus some others, too.

Brexit negotiations were still under way, however the UK currency's weakness had seen infltion spike as wage growth stagnated. Economic data was mixed and confidence was ebbing.

PM Theresa May's Tories had promised strong and stable governance, but instead delivered a hung parliament and all of the uncertainties that posed.

FXTM's Lukman Otunuga said that it would be interesting to see how the BoE solved this complicated jigsaw.

"While the end result remains uncertain, there is some certainty that Sterling will be impacted," said Otunuga.

"From a technical standpoint, the GBPUSD currently trades within a bearish channel on the daily charts. Previous support around $1.2775 could transform into a dynamic resistance that opens a path lower towards $1.2600."

Turning to the greenback, the dollar-spot index was down 0.34% to $97.265. The dollar itself was down 0.41% to $0.8931.

"The EUR/USD is higher on the day even though we had a mixed flash manufacturing and services PMI reports out of France, Germany and the eurozone," said Madden.

The theme was that the manufacturing PMI was robust and that for services slipped.

"The single currency has been moving higher against the US dollar for the past two months, but since the Federal Reserve were surprisingly hawkish at their meeting this month, we have seen some euro weakness," said Madden.