Investing.com — Sterling traded lower on Friday while the euro was little changed, as traders positioned for a high-stakes U.S. non-farm payrolls report that overshadowed domestic developments on both sides of the Atlantic.
As of 05:10 ET (09:10 GMT), fell to $1.3443, down 0.11% on the day, while held near $1.1525, up 0.01%.
“The dollar has regained a bit of ground into today’s release,” said Francesco Pesole, FX strategist at ING.
“The main drivers were primarily some souring in risk sentiment and an oil rebound on poor Gulf headlines, but some precautionary dollar buying into today’s data event might also have played a part.”
Pesole noted that dynamic amplified the negative dollar reaction seen after last month’s Federal Reserve meeting.
Federal Reserve Chair Kevin Warsh’s ambiguous communication at the July FOMC has left traders on edge for surprises, strategists said.
ING’s economics team is calling for a 70,000 rise in July payrolls, below the 80,000 consensus, with unemployment ticking up to 4.3% from a higher participation rate, a scenario the bank says “could result in a slightly softer dollar” without materially shifting September rate-cut pricing, which has been stable at 14-17 basis points since July.
Markets are looking to next week’s U.S. CPI print for a clearer signal on the Fed’s path, with Pesole saying a “decisive break in the dollar may have to wait” until then.
Friday’s sterling weakness was not driven by UK-specific fundamentals; no material domestic data or policy news was in play, with the move instead a function of broad, event-driven dollar demand ahead of payrolls.
Cable’s reaction was consistent with the dollar’s inverse moves against other G10 majors on the day.
For the euro, ING flagged rising sensitivity to U.S. data releases under the current Fed regime. “In the past year, EUR/USD has moved on average 0.2% in the hour after the NFP release,” Pesole said, noting the past two prints both produced 0.4% swings, larger than in prior instances of comparable payroll surprises.
ING’s baseline sees EUR/USD holding a 1.150-1.155 range into next week’s CPI, with the bank’s short- and medium-term view “unchanged”: bullish on the euro with a one-month target of 1.16 and a year-end target of 1.18.
ING said its broader dollar-bearish call remains intact, expecting USD softness over the coming months on an expected Fed hold, but sees a bigger chance that next week’s CPI and the wider August data batch “deliver a clearer dovish narrative to the front end” that would take the dollar more sustainably lower, the catalyst the bank says is needed to move EUR/USD and cable decisively out of current ranges.