Sterling nudges lower as Waller comments, US data underpin dollar

Sterling Falls as Hawkish Fed and Strong US Data Boost Dollar Outlook

By Sophie Kiderlin and Javi West Larrañaga

Market Reactions to US and UK Economic Developments

Sterling and Dollar Movements

Nov 10 (Reuters) - The pound nudged lower against the dollar on Tuesday as hawkish comments from Federal Reserve Governor Christopher Waller and US inflation data supported the greenback.

Sterling was last down 0.3% at $1.3395, having risen close to 0.7% in the previous session when reduced AI and Mideast worries alongside a drop in oil prices weighed on demand for the dollar and investors turned slightly more risk-on.

The dollar edged higher on Tuesday after Waller argued for more rate hikes and data showed that US consumer prices increased more than expected in October.

Sterling vs. Euro Performance

The pound was at 83.51 pence per euro, a touch lower on the day as it eased slightly from last week's 20-month high, hit after the Bank of England raised interest rates. The pound had been strengthening against the common currency for some time, and was still close to the recent highs despite its small dip.

Analyst Insights on Euro and Sterling

"The speculative market is heavily short euro, so any kind of relief, good news like I say, with energy prices coming down, that does increase the risk of the potential for some of those short positions to be lightened up and that could help the euro to recover some lost ground in the near term," Lee Hardman, senior currency analyst at MUFG, said. 

UK Economic Outlook and GDP Expectations

On the domestic side, investors will be watching for Britain's latest gross domestic product data, due on Thursday. A Reuters survey of economists forecasts 0.7% quarter-on-quarter growth in the third quarter, which would be a pick-up from the previous period.

Market Sentiment and Growth Prospects

"The market definitely over the last month has taken a more bullish view on the pound on the back of building optimism over kind of more sustained pickup in growth in the UK this year," Hardman said, noting that the GDP print is expected to confirm positive momentum. 

Potential Risks to Sterling

"I don't see the GDP data really significantly altering the pound's performance unless there was a big kind of downside surprise, which I think appears unlikely given we've obviously had a lot of the monthly activity data released already," he said.

(Reporting by Sophie Kiderlin in London and Javi West Larranaga in Gdansk; Editing by Susan Fenton)