Political tensions continued to dominate Sterling, although there was a slightly wider focus.

Political tensions continued to dominate Sterling, although there was a slightly wider focus.

The dollar was hampered by weaker homebuilding sentiment and a slight dip in interest rate expectations with the Euro able to make slight net gains despite on-going political concerns.

Sterling volatility eased slightly, although underlying tensions remained extremely high with net trade-weighted losses.

Global equities were undermined by growth concerns and fresh selling in the technology sector as the Nasdaq index declined 3.0%.

Fragile risk conditions triggered an element of defensive support for the yen and Swiss franc

Cryptocurrencies remained under sustained selling pressure with bitcoin at 13-month lows below $5000.

Political tensions continued to dominate Sterling, although there was a slightly wider focus. Former Brexit Secretary Davis stated that he did not expect a leadership challenge on Prime Minister May, although there was still intense speculation whether there would be sufficient votes to trigger a challenge. May defended the agreement in her CBI speech, although Sterling was unsettled by her opposition to an extension of the transition period and uncertainty remained extremely high.

The EU component of negotiations received increased attention during the day. Chief Negotiator Barnier stated called for calm and offered some backing for the UK government on the longer-term framework. There were, however, fresh tensions over Gibraltar with Spain asking for additional guarantees. Sterling dipped sharply during the European session following the Spanish concerns, although a very large Euro buy order also had an important impact as EUR/GBP surged to November highs near 0.8930 before correcting.

The Northern Irish DUP also emphasised their opposition to the budget deal by refusing to back some budget votes and underlying political tensions remained extremely high.

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