Pound fluctuates amid mixed risk appetite

The pound traded in a wide range yesterday, as a mixed market mood left the currency unable to find a clear directional bias.

Sterling is subdued at the open of today’s session, with GBP/EUR flat at €1.1528 and GBP/USD dipping to $1.2055. GBP/CAD is muted at CA$1.6532, while GBP/AUD is rangebound at AU$1.9116 and GBP/NZD climbs to NZ$2.0487.

Coming up, will a downbeat ADP employment report in the US cause USD exchange rates to weaken this afternoon?

What’s been happening?

The pound initially faltered yesterday, with the increasingly risk-sensitive currency being pressured by a cautious market mood.

Sterling subsequently rebounded in the afternoon, with GBP exchange rates rising in tandem with market risk appetite.

The US dollar, meanwhile, sought to consolidate its recent gains, and remained close to multi-month highs through Tuesday’s trading session.

The ‘greenback’s continued strength was aided by the publication of the latest US Job Openings and Labor Turnover survey, as a rise in new vacancies suggests labour demand in the US remains strong, something which would be supportive of another interest rate hike from the Federal Reserve.

At the same time, the euro was left to trade sideways yesterday in the absence of any market-moving Eurozone data.

What’s coming up?

A speech by European Central Bank (ECB) President Christine Lagarde will be in the spotlight for EUR investors this morning, with the euro likely to come under pressure if she strikes a dovish tone.

The single currency might take another knock with the publication of the Eurozone’s latest retail sales figures, which are expected to report sales growth continued to contract in August.

Meanwhile, the pound may also face headwinds this morning with the release of the UK’s latest services PMI. Barring a notable upward revision, September’s finalised figures are likely to reinforce the negative outlook for the UK economy.

Later this afternoon, the US dollar could see some volatility with the publication of the latest ADP employment figures as another decline in employment growth last month may spook USD investors.

On the other hand, the latest ISM services PMI could help buoy the ‘greenback’ if it points to the continued resilience of the US economy.