The pound fell 0.5% against the dollar on Wednesday as US jobs data came in stronger than expected. Earlier in the day the pound had benefited from encouraging assessment of UK services PMI for January. Sterling remains close to its six-week lows it reached this week after government minsters expressed a hard-line stance for negotiations with the EU.
Against the euro, the pound was flat, but PMI data reinforced the notion that the Bank of England would keep rates as they are. Analysts believe the pound will remain weak this year as the UK’s new budget is due to be presented amid some disagreement. Minister Sajid Javid is threatening serious spending cuts whilst Prime Minister Johnson’s advisers have been promising big spending in parts of the country on public services.
GBPUSD opened at 1.3032 and fell to a low of 1.2965 before closing at 1.2999
GBPEUR opened at 1.1809 and rose to a midday high of 1.1852 before dropping back down to close at 1.1819
Safe-haven currencies weakened for the second consecutive session as Chinese government measures to contain the coronavirus appear to be persuading markets to take riskier positions. The Japanese yen and Swiss franc both posted losses, with the yen experiencing its steepest daily drop in six months.
The dollar rose against safe havens and pushed the dollar index up by 0.2%. Investors also have eyes on the Iowa caucus results to determine which democratic party candidate has the lead. Victory for left-leaning candidates Bernie Sanders or Elizabeth Warren could once again boost safe haven currencies.
Elsewhere the euro fell 0.2% against the dollar and the Australian dollar gained 0.6% after the Reserve Bank of Australia kept rates on hold.
EURUSD opened at 1.1036 and fell steadily across the day, closing at 1.1006