Risk appetite held firm on Monday with further optimism that the US and China would sign a limited trade deal this month.

Risk appetite held firm on Monday with further optimism that the US and China would sign a limited trade deal this month.

Equity markets secured net gains with a fresh record high for the S&P 500 index as tech-sector confidence strengthened.

The US dollar recovered some ground with European currencies unable to gain further traction. The yen was undermined by higher global bond yields and a lack of defensive demand.

The Australian dollar edged higher after a marginally more positive Reserve Bank of Australian statement.

Tight ranges prevailed during the day as is often the case on the Monday following the monthly US jobs report. There was a marginal upgrade to the final Euro-zone PMI manufacturing index to 45.9 from the flash reading of 45.7 with the French and German reading also revised slightly higher, although the Euro-zone has still been in contraction territory since February as underlying sentiment remained weak.

The UK PMI construction index recovered slightly to 44.2 for October from 43.3, but remained close to 10-year lows with a sharp decline in the civil engineering sector. New orders declined for the 7th successive month even with the rate of contraction slowing. The data maintained expectations of a cautious Bank of England policy statement this week.

The Brexit Party indicated that it would go ahead and field candidates in around 600 constituencies given that there was no agreement with the Conservatives to join forces which had some negative impact on Sterling as pro-remain parties also looked to increase co-operation. The currency was unable to secure significant backing from improved global risk appetite.

There was reduced potential for Sterling short covering which also limited the scope for gains. GBP/USD retreated to lows below 1.2870 while GBP/EUR registered net gains to near 1.1580. Sterling was little changed on Tuesday and GBP/USD held below 1.2900 with little impact from a firm BRC retail sales report.

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