The US dollar surged by almost one per cent in a session against the euro and rose to a three-week high against a basket of currencies after revised second quarter US growth outstripped estimates. Alongside a bigger-than-expected drop in US weekly jobless claims, the data raised optimism about the US economy ahead of critical non-farm payrolls report.

Sterling was boosted by UK consumer confidence data, moving to a nine-day high against an under-pressure euro. However, Cable is lower and the British pound will face a big test with key UK data on services and manufacturing output due alongside the Bank of England’s monetary policy announcement.

The euro should stay under the spotlight with forecasts suggesting that eurozone inflation and unemployment data will encourage the European Central Bank to leave open the option of further monetary stimulus in its policy meeting.

Sterling

The pound found support after UK consumer confidence data came close to a four-year high, reflecting the positive mood in the UK at present. Sterling has moved to a nine-day high against the euro but is under pressure from a rising US dollar following robust US second quarter growth revisions. Weakness in Cable could undermine the pound in other crosses, with investors favouring safe haven currencies amid military threats in Syria.

US dollar

The US dollar surged to a three-week high against a currency basket after much-better-than-expected news on the US economy suggested that it might be ready for the Federal Reserve to begin exiting its loose monetary policy. Weekly jobless claims fell by 6,000 to 331,000 in the latest period and comes before important non-farm employment report. Furthermore, US second-quarter growth was revised higher to a 2.5 per cent annual rate, eclipsing forecasts of 2.2 per cent and the 1.7 per cent pace recorded in the first quarter. Constructive fundamental news amid a backdrop of elevated geopolitical jitters should prove a good cocktail for US dollar strength.

Euro

The euro has fallen by as much as 1.5 per cent against sterling over the past few days following a speech from Bank of England Governor Mark Carney, and disappointing German economic data. Although the unemployment rate in Europe’s powerhouse economy stayed at 6.8 per cent, there was a 7,000 increase which went against expectations of a 5,000 fall. Investors will study eurozone inflation and unemployment figures.

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