Sterling drifted lower into the New York open following the latest round of Brexit rhetoric.

The US dollar held a firm tone with solid employment data, although it retreated slightly from highs with trade data increasing medium-term unease.

European currencies were resilient despite Brexit deadlock with hopes for ECB cheap loans underpinning peripheral bonds.

The Canadian dollar weakened sharply after a more cautious Bank of Canada policy statement triggered a further scaling back of interest rate expectations.

Chinese backing of tax cuts supported risk appetite, although the impact was offset by underlying trade doubts. Equity markets outside China registered significant net losses.

Oil prices dipped sharply on a large inventory build before regaining ground.

Sterling drifted lower into the New York open following the latest round of Brexit rhetoric. EU sources indicated that a breakthrough in talks was unlikely before the weekend while Chief Negotiator Barnier also stated that there had been no agreement on the Northern Ireland backstop so far with both sides reporting that talks were difficult.

External Bank of England MPC member Saunders stated that monetary tightening may be needed in the future, although there may be no need to act now with growth not strong enough to trigger excess demand.

GBP/USD found support near 1.3125 and rallied to around 1.3170 while GBP/EUR rallied from 1.1600. Reports surrounding Brexit talks remained negative with EU officials calling for the UK to make fresh proposals over the next 48 hours Sterling was resilient with speculation that any defeat next week would push the UK towards a customs union while a ‘no-deal’ outcome was still expected to be rejected by parliament and the UK currency secured slight net gains.

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