FX round-up: Sterling holds up well as attentions turn from Macron to ECB, US tax reforms

Sterling held up relatively well on Tuesday -- up on the dollar but down on the euro -- as the market looks to the European Central Bank's rate decision later in the week, US tax reforms tomorrow and a stack of other economic data due on both sides of the Atlantic.

At 16:52 BST, sterling was up 0.28% to $1.2832, but down 0.34% to €1.1735. The dollar-spot index was down 0.29% to $98.801. Sterling rose on the aussie, kiwi, loonie, rand and yen.

"The pound has held up fairly well today after borrowing figures for 2016 came in line with expectations, at £52bn for the latest fiscal year, which in percentage terms is its lowest level since the financial crisis in 2008," said Michael Hewson of CMC Markets UK.

"The euro has also drifted higher on reports that the ECB will remain on hold later this week with a possible acknowledgement to the improvement in the European economy likely to prompt a slight change of tone," said chief market analyst Hewson.

Connor Campbell, financial analyst at Spreadex, noted the pound had continued to hold above $1.28, but failed to achieve gains on the euro.

The euro's gains early this week followed the well-received outcome to the first round of France's presidential election. Traders would now look to the second round in two weeks' time.

A string of European Union, US and UK data at the back end of the week would be closely watched, and so, too, US President Donald Trump's proposed tax reforms due out tomorrow.

Turning to the dollar, it was down 0.66% to €0.9140, but managed gains on the aussie, loonie, kiwi, rand and yen.

Lukman Otunuga, research analyst at FXTM, said the greenback could yet find itself under renewed selling pressure if Trump's big tax reform and tax reduction announcement on Wednesday failed to provide investors with any additional clarity.

"The sheer lack of detail that markets have been offered over the proposed fiscal plans have challenged the Trump rally, as the growing threat of fiscal spending failing to meet the market expectations exposes the Dollar to further losses," said Otunuga.

He added that, from a technical standpoint, weakness below $99.00 on the dollar-spot index could open a path towards $98.80 and $98.50 respectively.

"In an alternative scenario, a decisive breakout above 99.50 could open the path back towards the 100.00 psychological level."