Pound Weakens Amid Hawkish Fed Minutes

The pound dropped against its major counterparts in early European deals on Thursday, as Fed minutes affirmed that further rate increases would be appropriate and dashed hopes for rate cuts in 2023.

The minutes reiterated that officials continue to anticipate that ongoing rate increases would be appropriate to achieve the Fed's dual objectives of maximum employment and price stability.

The minutes added that none of Fed officials anticipated that it would be appropriate to begin reducing rates in 2023.

Investors await economic reports on U.S. weekly jobless claims, private sector employment and trade deficit later today for more direction.

At 4.30 am ET, UK S&P/CIPS composite PMI data is due. Economists forecast the index to rise to 49.0 in December from 48.2 in the previous month.

The pound dipped to 2-day lows of 1.1140 against the franc and 0.8839 against the euro, off its early highs of 1.1216 and 0.8783, respectively. The pound is seen challenging support around 1.09 against the franc and 0.90 against the euro.

The pound was lower against the greenback, at 1.1999. On the downside, 1.16 is likely seen as its next support level.

The pound edged down to 158.95 against the yen in the previous session and held steady thereafter. At yesterday's close, the pair was worth 159.80.

Looking ahead, Eurozone PPI for November and U.K. services PMI for December are due out in the European session.

U.S. ADP private payrolls data for December is scheduled for release at 8:15 am ET.

U.S. and Canadian trade data for November and U.S. weekly jobless claims for the week ended December 30 will be released in the New York session.