An easing of risk appetite has strengthened the dollar

A broadly stronger pound eventually relinquished its gains against the dollar yesterday, to close the day down 0.15% at $1.5955.

  • The British currency initially edged higher after the IMF said that UK gross domestic product will expand 0.9 percent next year, from a July prediction of 0.2 percent, as the housing market slump eases and exports increase.
  • However, the pound fell back in the afternoon, weighed down on speculation that money authorities would express some form of support for the US currency at the G7 meeting.
  • Additionally data showed that the UK manufacturing PMI unexpectedly fell in September for the second consecutive month, which hampered sterling’s progress.
  • In the US, both unemployment claims and manufacturing data posted below forecasts, which eased risk appetite and pulled the pound back below the 1.60 resistance level.
  • The dollar is trading higher today as investors take up defensive positions as they await US non-farm employment data released at 13:30BST, which will give the market short-term direction.