Dollar sentiment was boosted by stronger than expected ISM non-manufacturing data.

Dollar sentiment was boosted by stronger than expected ISM non-manufacturing data which provided relief over the US outlook while other majors failed to generate fresh support.

USD/JPY was also boosted by weaker yen demand and higher US yields before hitting resistance around 109.20 while EUR/USD traded below 1.1100.

Risk appetite held firm despite although an element of caution over US-China trade developments restrained enthusiasm.

Euro-zone equity markets hit 4-year highs before fading as US stocks were hit by profit taking.

Commodity currencies failed to make further headway with US-China hopes priced in. Oil secured net gains with WTI posting 5-month highs before fading after the API inventory data. Precious metals dipped sharply on a combination of dollar gains and firm risk appetite.

The dollar overall held firm after the ISM data with EUR/USD dipping below 1.1100 and posting lows near 1.1060 before a slight recovery on Wednesday as an increase in German factory orders had little impact.

The UK PMI services index strengthened slightly to 50.0 for October from 49.5 previously and slightly above consensus forecasts. New business continued to decline for the month with significant losses in export orders as political uncertainty continued to sap confidence. Order backlogs and employment both declined on the month, although confidence in the outlook strengthened to a 3-month high.

Sterling was unable to draw significant support from the data, although the UK currency was resilient during the day. There was a substantial amount of political noise during the day, but no major developments as underlying uncertainty deterred activity with markets monitoring opinion-poll developments.

GBP/EUR rallied to 1.1650 resistance area although the pair held just below 5-month highs. GBP/USD drifted lower to trade below 1.2900 given the firm dollar and Sterling drifted marginally lower on Wednesday.

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