Dollar holds ground as central bank meetings loom, pound jumps

Key Points
  • The dollar index stood almost flat at 97.706 in mid-Asian trade, after rising 0.3% on Friday.
  • The euro traded at $1.10575, after hitting a one-week low of $1.10395 on Friday.
  • Elsewhere, sterling traded at $1.3143, not far from a seven-month high of $1.3166 set on Thursday.
In this photo illustration, a person is holding dollar bills on April 5, 2018 in Berlin, Germany.
Thomas Trutschel | Photothek | Getty Images

The dollar held its ground on Monday thanks to last week's stronger-than-expected jobs data, although worries about U.S./China trade talks kept gains in check, while Britain's pound jumped on the latest polls ahead of this week's election.

Sterling hit a fresh 2-1/2 year high against the euro after the latest opinion polls showed the governing Conservative Party has extended its lead over rivals ahead of Thursday's national election.

Meanwhile, the dollar stood its ground in the wake of Friday's jobs data. Attention shifted to U.S. Federal Reserve and European Central Bank policy meetings this week, while a deadline looms for the next wave of U.S. tariffs on Chinese goods to kick in.

Top White House economic adviser Larry Kudlow said on Friday that a December 15 deadline is still in place to impose a new round of U.S. tariffs on Chinese consumer goods, but President Donald Trump likes where trade talks with China are going. 

"If we see Donald Trump decide not to delay tariffs, that would lead to a risk off reaction in markets," said Nomura currency strategist Jordan Rochester.

"We don't expect tariffs to go into effect as the talks are ongoing," he said, adding he did not expect any "fireworks" from the central bank meetings. 

The dollar index was little changed at 97.63, after rising 0.3% on Friday on news that U.S. nonfarm payrolls increased by 266,000 jobs last month, the biggest gain in 10 months.

Europe's single currency traded at $1.1064, after hitting a one-week low of $1.10395 on Friday.

The dollar changed hands at 108.52 yen. It had lifted to 108.92 yen on the U.S. jobs data before losing momentum. 

Analysts said Friday's jobs numbers was positive for the greenback, bolstering expectations that the Fed would this week continue to signal a pause in its rate-cutting cycle.

"As long as more people are working and getting paid more, consumer demand is likely to hold up - that should keep the U.S. economy going and reduce the likelihood of the Fed cutting rates again," said Marshall Gittler, strategist at ACLS Global.

Data meanwhile showing China's exports shrank for the fourth consecutive month in November, underscored persistent pressures on manufacturers from the Sino-U.S. trade war.

Elsewhere, sterling rallied to a seven-month high at $1.3180 and to a 2-1/2 year peak versus the euro at 83.94 as the latest polls fuelled optimism that Thursday's election will end near-term Brexit uncertainty.

The ruling Conservative Party extended its lead over the opposition Labour Party to 14 percentage points, up from 9 a week ago, an opinion poll by Survation for ITV's Good Morning Britain showed on Monday.