Sterling dips, currency markets look to the U.S. for cues

The pound dipped from its ​recent high against the dollar and ​also slid versus the euro ‌on Wednesday, ​but with little in the way of major news from Britain, the currency was mainly shaped by broad ‌risk sentiment and developments elsewhere. Sterling shed 0.2% on the dollar to $1.3625, retreating from a six-month high of $1.3675 hit last week. It was at 85.61 pence against the euro, also ‌a fraction softer on the day.

The pound has performed reasonably well among ‌major currencies this year, supported by a resilient UK economy and high British bond yields. These are particularly relevant when markets are calm, as currency markets are at present, as traders focus more ⁠on carry ​trades which profit ⁠from rate differentials. It has gained just over 1% on the dollar and nearly 2% on the euro ⁠this year.

But the focus for currency markets on Wednesday was on moves in the United ​States. "There is no UK data of note today once again, leaving ⁠cable (the pound/dollar exchange rate) to trade off this afternoon's U.S. releases, with Friday's Jackson Hole keynote ⁠still ​the next probable directional catalyst," said analysts at Monex Europe.

U.S. PCE, the Federal Reserve's preferred inflation gauge, is due at 1230 GMT, and could shape expectations ⁠for the Fed's interest rate path this year. It will also set the scene for ⁠Fed Chair ⁠Kevin Warsh's speech on Friday at the important central banking conference, which past chairs have used as a high-profile platform to ‌signal policy thinking ‌or reinforce existing messages.