(ShareCast News) - Sterling gained on the dollar and the euro as rate hike expectations mingled with Brexit news, while the dollar was only edging higher amid strong economic data.
The pound rose 0.5% against dollar and euro late in the session at 1.3277 and 1.1393, continuing strong form from the start of the week ahead of an anticipated Bank of England rate hike on Thursday.
The pound was fairly flat for most of the session but climbed late on amid comments from the UK's and EU's chief Brexit negotiators.
EU tough talker Michel Barnier said the dates for the next round of talks would be arranged in the "next few hours or days".
Analyst David Madden at CMC Markets said: "This gave sterling traders some optimism as it moves along the post-Brexit deal possibility. Adding to that, if Mr Barnier is making the first move, it could be suggested, the EU are keener than they are letting on that they want to reach an agreement soon."
Meanwhile, Brexit Secretary David Davis gave a breezily confident performance in front of a parliamentary committee, saying talks with his opposite number will start again next week and should intensify.
Davis also acknowledged that the withdrawal agreement under Article 50 may be no more than a "political agreement" rather than a full, legal treaty.
"It should be agreed, because otherwise how will this House, how will the Commons, make a decision on whether the deal is acceptable," he said.
The US dollar jolted higher against the Canuck after Canada's economy turned negative in August with a GDP reading of -0.1% versus an expected reading of 0.1%.
The US dollar index was up 0.07% to 94.59, bolstered by a better-than-expected Chicago PMI and US Conference Board consumer confidence survey.
Further gains were perhaps prevented as traders sat on their hands a day ahead of the Federal Reserve statement.
The US central bank is not expected to raise rates, but the market will give the statement a close reading for clues about future rate moves.
But analysts at Citi did not expect the FOMC to indicate a hike is likely in the next few months.
"No such signal was given at the January and May meetings, which preceded the March and June hikes. The committee will want to retain the option not to hike - especially given recently weak inflation data," Citi said, noting that a December hike is being priced by the market at 80% and so is still data dependent.
The euro was largely flat against the dollar after the eurozone had mixed economic data, while Germany was on holiday to celebrate Reformation Day.
GDP growth was better than expected in the third-quarter on a year-on-year basis, and the unemployment rate dipped from 9.0% in August to 8.9% for September.
Consumer price inflation rate slipped to 1.4% from 1.5% in September. Weak inflation has been issue for the European Central Bank (ECB).
"So, despite the broad-based economic growth momentum and continued solid job creation, these inflation figures illustrate perfectly why the ECB is set to continue with its net asset purchases throughout the whole of 2018, and is highly unlikely to raise interest rates until mid-2019 at the earliest," said economists at Daiwa Capital Markets.
Headlines from Spain were dominated by exiled Catalan president Carles Puigdemont giving a press conference in Brussels on where he assured he would return to Spain "immediately" if he received sufficient "guarantees" from officials in Madrid.