The pound sterling fell 0.10% against the dollar, while the euro dropped 0.03%. Traders are awaiting the Bank of England's rate decision and US employment data.
On Thursday, the pound sterling weakened ahead of the upcoming Bank of England interest rate decision. The dollar paused its correction after the US midterm elections and held around the 101.5 mark on the DXY index.
By 14:10 Moscow time, the pound fell 0.10% against the dollar and traded at 1.3458 dollars. This could interrupt the six-day growth series of the pair. The euro dropped 0.03% and was at 1.1226 dollars.
The Democrats' victory in the elections led to a weakening of the dollar, as ING had expected. However, the bank believes that the potential for further decline is limited. According to ING currency strategist Francesco Pesole, for a more significant correction, interest rates must start moving against the dollar.
The fall in oil prices did not become an unambiguously negative factor for the dollar. With an 8% decline on Wednesday, two-year dollar swap rates fell by 5 basis points, while for the euro and pound the decline was 8–10 points.
US economic data confirms expectations of Fed policy tightening. The ISM services business activity index turned out slightly weaker than forecast, but the employment sub-index rose to 51.4 — the maximum since February. The number of new jobs according to ADP data amounted to 86 thousand.
The consensus forecast for Friday's employment data is 65 thousand jobs. ING expects the Bank of England to raise the rate by 25 basis points to 4% today with a vote ratio of 7:2. The February increase is already fully priced in by the market.
Inflation in the eurozone in October rose to 4% from 3.8%, as expected. The core indicator remained at 2.5%. ING believes that this brings the ECB closer to a rate hike in December. According to the bank, the EUR/USD pair has little potential to rise above 1.130, and the GBP/USD pair is limited to around 1.350 in the short term.