FX round-up: Sterling pushed higher by Trump aide comments on euro

Despite initially showing scant reaction, as the afternoon wore on Sterling was pushed higher by remarks from US president Donald Trump's top trade adviser, Peter Navarro, against what he dubbed a "grossly undervalued" European single currency.

As of 1607 GMT, the pound was strengthening 0.73% to 1.2575 versus the greenback, while the US dollar spot index was fumbling near the day's lows and trading off by 0.91% at 99.487.

Trump's 'trade czar' told the Financial Times that the low value of euro, which he denounced as an “implicit Deutsche Mark”, was providing Germany a major trade advantage over both its EU partners and the US.

Commenting on Navarro's remarks, Dr. Vasileios Gkionakis, Global Head of FX Strategy at UniCredit Bank, said: "As the initial euphoria of the Trump election has just started to fade and the market is only now waking up to the reality that the Trump political agenda should be associated with a risk premium (something markets had completely neglected to do for nearly two months), and as market-based measures of US inflation expectations have started outpacing nominal yields, compressing US real rates, markets have started reassessing their love of the greenback," Gkionakis said.

The UniCredit economist also said he stil liked the Japanese yen and commodity currencies, such as the Australian and Canadian dollars, and now saw increased risks to the upside to their forecast for euro/dollar at 1.10 by year's end.

Perhaps also contributing to the weak tone in the US dollar, the majority of the Tier 1 indicators published Stateside on Tuesday printed below forecasts, including MNI's Chicago PMI, the Conference Board's consumer confidence gauge for January and the fourth quarter US employment cost index.

On the other side of the coin, headline consumer prices in the euro area sped ahead at a 1.8% year-on-year clip in January, up from 1.1% in December (consensus: 1.5%).

At the 'core' level on the other hand, excluding food and energy prices, the rate of inflation was unchanged at 0.9% annualised.