The pound and the euro strengthened against the US dollar on Thursday after weak US economic data pushed the US dollar lower a day earlier, as voting began in Britain and French elections loomed.
Sterling firmed slightly at $1.2757, after rising 0.46% a day earlier to hit a three-week high, while the euro was trading above $1.0801, up 0.1% after a 0.4% rise on Wednesday and hitting a three-week peak.
The pound has now strengthened over the year against the US dollar, making it the best performing G10 currency in 2024.
The US dollar fell after weaker-than-expected US economic data on Wednesday, including a weak services report and the ADP jobs report, which reflected a slowing economy, after an increase in initial applications for jobless benefits last week.
"This data raises expectations that maybe the labor market is weakening and the Fed will be able to cut interest rates later this year," said Jane Foley, head of FX strategist at Rabobank.
Markets now see nearly 50 basis points of Federal Reserve interest rate cuts in 2024, most likely starting with a 25 basis point move in September and another at the end of the year, a bet that also lowers US Treasury yields.
The most important monthly US labor market data, nonfarm payrolls, due out on Friday, is expected to show an increase of 190,000 jobs in June after a 272,000 increase in May, according to a Reuters poll of economists.
US markets were closed on Thursday following the July 4 Independence Day holiday.
British voters began going to the polls on Thursday and are expected to elect Labor leader Keir Starmer as the next prime minister, ousting Rishi Sunak's Conservative party after 14 often tumultuous years.
Foley cites two main reasons for the limited market reaction to election and campaign calls.
"Firstly, the Labor Party has been consistently above (the Conservatives) in opinion polls for some time, so there are no surprises," he said.
"The second reason is that Keir Starmer and Rachel Reeves have done a good job of convincing investors and voters that they have moved the party towards the centre."
