ExchangeRates.org.uk - The dollar lost ground on Wednesday following weaker-than-expected business confidence data while the Euro was hampered by on-going French political concerns.After briefly dipping to 1.2630, the Pound to Dollar (GBP/USD) exchange rate rallied to 1.2700.
According to Scotiabank (TSX:BNS); “Sterling price action is leaning a little more positive.
It added; “Key (bull trigger) resistance remains distant at 1.2760/65, however.
A push above 1.2700 could signal a bit more intent on reaching towards those levels.
Support is 1.2625/30.”
The Pound dipped earlier following comments from Bank of England Governor Bailey.
When asked whether four rate cuts were consistent with the BoE’s central planning scenario, Bailey responded “Yes.”
Money markets have already priced in between three or four rate cuts for next year, preventing sustained Pound selling and expectations of Fed rate cuts also cushioned the currency.
The Pound to Euro (GBP/EUR) exchange rate advanced to near 1.2100 before settling around 1.2065.
Rabobank forecasts a GBP/EUR rate of 1.2270 on a 12-month view.
With all eyes on France, Fiona Cincotta, senior market analyst at City Index commented; "There's political stability (in the United Kingdom (TADAWUL:4280)) that is just not present in major economies in the euro zone."
Kirstine Kundby-Nielsen, FX analyst at Danske Bank (CSE:DANSKE) noted; "European politics are taking centre stage in terms of the no-confidence vote that we have this afternoon."
Prime Minister Barnier’s government will face the vote after the European close with widespread expectations that he will lose and that the government will fall.
Marc Chandler, chief market strategist at Bannockburn Forex in New York commented; "They can't have an election until next July.
So what they'll probably do is appoint a prime minister and try again, or let Barnier become the caretaker prime minister and pass some laws to keep the government going until July.”
The latest US ADP data recorded an increase in private payrolls of 148,000 for November compared with consensus forecasts of 165,000 and followed a downwardly-revised 184,000 for October which was originally reported at 233,000.
ADP chief economist Nela Richardson commented; "While overall growth for the month was healthy, industry performance was mixed.
Manufacturing was the weakest we've seen since spring.
Financial services and leisure and hospitality were also soft."
According to Danske’s Kundby-Nielsen; "ADP today might give some indications of what we can expect for nonfarm on Friday."
In this context, there were expectations of subdued employment report which hampered the dollar.
The ISM non-manufacturing index dipped to 52.1 for November from 56.0 the previous month and well below expectations of 55.5.
There was a sharp slowdown in production and orders growth with employment growth also slowing, although there was a marginal increase in the rate of growth in prices.
Following the data, markets priced in just over a 75% chance of a Fed rate cut this month.
This content was originally published on ExchangeRates.org.uk