Sterling, which has tumbled for the whole week as investors rushed to factor in the possibility of Britain leaving the European Union without transition trade arrangements in place, has gained 0.2% at $1.2167, crawling back from a 28-month of $1.2120 plumbed yesterday.
Few expect the pound’s respite will last long, given new Prime Minister Boris Johnson’s reiterations of his commitment to take Britain out of the European Union by the Oct. 31 deadline regardless of whether transition trading agreements are in place.
The currency has fallen more than 4% this month to the dollar and is down 8% since early May as more investors started to price a no-deal outcome which had earlier been considered highly unlikely.
The dollar dipped after two-month highs as robust economic data all but ruled out the chance that the U.S. Fed may deliver a half-point interest rate cut.
The Federal Reserve is expected at 1800 GMT to announce its first rate cut since 2008 and 78% of traders now price a 25 basis-point cut, with the likelihood of a deeper easing diminishing as data, from second-quarter economic growth to consumer confidence, has been above-forecast.
The focus will instead be on whether the Fed leaves the door open for further policy easing to insulate the economy from slowing global growth and the fallout from trade conflicts.