The British pound climbed higher on Thursday following a report that UK Prime Minister Theresa May has struck a deal with Brussels on financial services, with the dollar standing its ground near a 16-month high versus a basket of its major rivals on strong U.S. economic data.
The greenback was lifted overnight by the ADP national employment report which showed that U.S. private sector payrolls rose by the most in eight months in October, confirming that the economy continues to grow at a relatively robust pace.
That reinforced the bias for continued rate hikes by the Federal Reserve, with a 25-basis-point increase expected in December and potentially two more in 2019.
The dollar index, slipped slightly lower to 96.91, still hovering near a 16-month high of 97.2 hit in the previous session.
The focus in the Asian session fell on the sterling, which jumped as much as 0.6 percent against the buck following a report by the Times of London that May has struck a deal with Brussels on financial services. This would give UK financial services companies continued access to European markets after Brexit.
Cable which was last 1.2843, up 0.62 percent on the day, has lost 3.6 percent versus the dollar over the past three weeks as markets fretted over whether Britain would secure an orderly exit from the European Union.
Forex traders are also looking ahead to the Bank of England's (BoE) monetary policy decision later on Thursday. Policymakers are expected to have voted unanimously to keep rates on hold this month, and on average do not see a further rate rise until May.
USD/JPY was up a touch to 112.78. The Japanese currency weakened to a three-week low of 113.38 on Wednesday after the BOJ signalled its intention to maintain its ultra loose monetary policy for some time. EUR/USD bounced above 1.1350 after testing a key support level around 1.1300.
