FX round-up: Underwhelmed sterling limps higher as PM May inks DUP deal

Sterling limped a little higher against the dollar and euro as PM Theresa May's Tories finally inked some kind of government-forming deal with Northern Ireland's DUP.

The £1bn confidence and supply deal -- set against a backdrop of chronic Tory-authored austerity -- took almost two weeks to achieve and was widely anticipated by the market, which explained sterling's whimper upon confirmation.

At 17:23 BST, sterling was up 0.03% to $1.2722. It rose 0.07% to €1.1372. The pound fell against the aussie, loonie, kiwi and rand, but gained on the yen.

"Price action (in GBP) suggests that the ongoing Brexit developments have left investors increasingly jittery," said FXTM research analyst Lukman Otunuga.

"Sellers have exploited this anxiety to drive prices lower," he said, adding that Brexit talks were likely to retard sterling's gains.

"With uncertainty still the name of the game when dealing with Brexit and Sterling, further downside should be expected moving forward."

Otunuga said technical traders might utilise the $1.2775 resistance level on the GBPUSD to drive the pair lower towards $1.2600.

Craig Erlam, senior market analyst at Oanda, added that the Tory-DUP deal did not offer the kind of stability that a majority or even full coalition would.

"The deal will see Northern Ireland receive an extra £1bn over the next two years in exchange for the DUPs support for May’s minority government.

"With the deal now agreed, the next question is whether May will remain in charge throughout that period," pondered Erlam, and potentially others, too.

Sterling was whalloped lower by the outcome of the non-binding Brexit referendum last year, and received a further southward slap when May produced a hung parliament at the election.

Meanwhile, the dollar-spot index was up 0.03% to $97.293. The greenback also gained on the euro and yen, but fell on the key commodity currencies.

"The EURUSD was given two boosts today," said David Madden, market analyst at CMC Markets UK.

The first came from the German Ifo business climate report for June, which came in at 115.1, with traders having expected a reading of 114.7.

The second helping hand to the single currency was from the US, when that country's durable goods orders fell by 1.1% month-on-month in May, undershooting forecasts by a wide margin.

Otunuga continued: "Although Federal Reserve officials have consistently displayed optimism over the US economy and rate hike timings, the markets still remain unconvinced.

"From a technical standpoint, the Dollar Index is still at risk of trading lower if bulls fail to break above $98.00."