FX round-up: Bears see sterling down as market awaits Fed's minutes
Sterling suffered as market bears again sweated the prospects of Brexit, pushing the UK currency lower on most key crosses ahead of the country's Q1 second-estimate GDP data tomorrow.
More immediately, the market is looking to the US Federal Open Market Committee's minutes at 19:00 BST, and anything these might reveal on future interest rate rises in that country.
"The GBPUSD is slightly offside today, and the lack of economic announcements from the UK added to the shortfall in volatility," said David Madden, market analyst at CMC Markets UK.
"Traders will be trying to decipher if the US central bank will go ahead with an interest rate rise next month or not?" he pondered.
At 17:23 BST, sterling was 0.18% to $1.2938. This was as the dollar-spot index rose a cautious 0.05% to $97.402 ahead of the FOMC's grand reveal.
FXTM research analyst Lukman Otunuga said the fact sterling struggled to maintain gains above $1.3000 highlighted how the unit remained gripped by Brexit uncertainty.
Sterling, he opined, was overall searching for direction. It remained at risk of tumbling sharply if bulls failed to conquer $1.3000.
"The second-estimate for the first quarter GDP report ... should provide some further insight to how Brexit has impacted the UK economy," said Otunuga.
"An unexpected decline in the second estimate will most likely invite sterling bears.
"From a technical standpoint, a breakdown below $1.2900 on the GBPUSD may open a path lower towards $1.2775."
Sterling was down on commodity currencies the aussie, loonie, kiwi and rand, and versus the euro it fell 0.19% to €1.1573. The greenback rose 0.06% to €0.8947.
"The euro teetered underneath recent highs as European Central Bank (ECB) officials including President (Mario) Draghi talked down inflationary pressures even as European data impressed again," said Jasper Lawler, senior market analyst at London Capital Group.
Turning to the dollar, in addition to its performances on sterling and the euro, it was up on the aussie and yen, but down on the loonie, kiwi and rand.
The dollar-spot index -- mentioned earlier as being cautiously ahead -- had benefitted as investors offloaded bearish positions prior to the Fed.
"It'll be interesting to see what effect the latest meeting minutes from Janet Yellen and her FOMC friends has," said Connor Campbell, financial analyst at Spreadex.
"Despite a mid-June rate hike looking increasingly likely the dollar has had a tough time of late, slumping to a six-month lows against both the euro and the pound," he added.
So far this month, Campbell said, the US political chaos had outweighed any Fed hawkishness.
"A lack of Russian Trumpdates this week, however, could mean this evening’s glimpse into the Fed draws interest rates back into the spotlight."
Otunuga added that while the market expected the pending minutes to reinforce expectations of a June rate hike, investors would be searching for further clues on when, or if, a third rate hike was still on the table.
"With economic data in the US becoming increasingly mixed and the Trump jitters returning with a vengeance, the prospects of a third US interest rate increase in 2017 could come under threat."