Pound at Lowest Since 1985 Ahead of Labour Data

With more hawkish commentary from certain Federal Reserve members foretelling potential interest rate increases, the upcoming report due later in the session from payroll processor ADP could spur further rate hike speculation. The US dollar is currently hovering close to a two-month high against a basket of currencies, buoyed by higher Treasury yields and hawkish comments from Fed’s Loretta Mester. The dollar index last stood at 95.989, just below its August 9th high of 96.442. The greenback started the week on a strong footing following a better than expected survey of the US manufacturing sector. Should the upcoming ISM non-manufacturing data and Markit Services PMI also beat expectations, it could heighten upward dollar momentum higher. US equity markets closed marginally lower on Tuesday as a result of a stronger dollar amid growing expectations that monetary tightening would lead to a massive reallocation of investment capital globally.

The Euro is extending its bounce from Tuesday’s session after a report suggested the ECB was considering tapering its asset purchase program. According to Bloomberg News, the ECB is thinking of gradually winding down its EUR 80 billion of monthly bond purchases, suggesting that the Central Bank is rapidly running out of available assets to purchases. The result was wild swings in the Euro as investors reacted to the possibility of less accommodation with EURUSD rising 0.20% to 1.1222 after rallying as high as 1.1239 on Tuesday. On the other hand the UK Pound fell to a fresh, three decade low on concerns that the UK’s exit from Europe could rock the domestic economy. Analysts fear that latest comments from the British government points to a "hard Brexit," which could lead to an exodus of a large number of banks from London, sending GBPUSD tumbling.