On Friday, the pound sterling and the euro declined against the dollar, which held its positions in anticipation of October US labor market data.
Currency movements on Friday
The pound sterling fell 0.54% against the dollar and reached the mark of 1.3391. The euro lost 0.40% and traded at the level of 1.1174 as of 13:40 Moscow time. The dollar remained stable, despite the sell-off of shares of technology companies, which began after the victory of the Democratic Party and affected even defensive sectors.
Investors preferred to transfer funds into cash rather than abandon the dollar. According to Chris Turner from ING, the dollar index may return to the middle of the 101.50–102.50 range thanks to the high liquidity of the American currency and rates of around 4% on weekly deposits.
Expectations for US data
Markets are preparing for the publication of the report on the number of jobs outside agriculture for October. ING forecasts an increase of 82,000 versus 29,000 in September. Good figures could confirm the resilience of the labor market and support short-term rates, which have already fallen by almost 50 basis points since the end of September.
Pound reaction and Bank of England policy
The Bank of England raised the key rate to 4% the day before, but the pound still weakened. Bank head Andrew Bailey noted the decline in oil prices and progress in relations with Iran, which could slow inflation. Turner believes that the regulator's tight policy will allow the pound to maintain an advantage over other currencies, even if inflation in the UK rises to 5% in the second quarter of next year.
Euro position and analysts' comments
The euro's dynamics remained inexpressive. Turner expects that in the absence of weak US labor market data, the EUR/USD pair will remain around 1.12. Markets are pricing in an ECB rate hike in December by 18 basis points. ECB Chief Economist Philip Lane will speak at 12:30 Moscow time.
HSBC noted pressure on major currencies from unemployment claims data and expectations of Fed policy tightening. According to the LSEG consensus forecast, by the fourth quarter GBP/USD could reach 1.3346, and EUR/USD — 1.1250.