Dollar holds gains after rate cut bets pushed back

Daily Currency Update

The dollar’s advance has continued over the past 24 hours although it seems to be running out of steam as European traders come online.

After Friday's blowout US Jobs report GBP/USD has dropped over two cents from around 1.2750 to bottom out around 1.2520 in the early hours of this morning. Extra downward pressure was added to the pair by the monthly US ISM Services PMI for January which came in better than expected at 53.4, a considerable gain from the previous month's 50.6. The report's author, Anthony Nieves, Chair of the Institute for Supply Management stated in his notes: “The overall growth rate increase in January is attributable to faster growth of the New Orders, Employment, and Supplier Deliveries indexes. The majority of respondents indicate that business is steady. They are optimistic about the economy due to the potential impact of interest rate cuts; however, they are cautious due to inflation, associated cost pressures,, and ongoing geopolitical conflicts.” - this again illustrates the resilience of the US economy despite the aggressive interest rate hiking cycle it has been through and the likelihood that Friday's jobs data means a March cut dead and buried.

The UK Construction PMI data is due this morning and is expected to move up to 47.2 from a previous reading of 46.8. GBP/USD is currently around 1.2550 with GBP/EUR down to 1.1675 towards the bottom of its recent range.