Overall global risk appetite held firm amid hopes for US-China trade progress.

Overall global risk appetite held firm amid hopes for US-China trade progress and an easing of political risk premiums.

Bond yields moved sharply higher and there was a decline in support for the yen and Swiss franc.

USD/JPY posted 5-week highs amid reports that the Bank of Japan could ease monetary policy further.

Equities were able to make only limited gains given reservations over earnings trends and a retreat in the tech sector.

European currencies gained some support from a slight easing of political fears with Sterling close to 6-week highs.

Oil prices dipped after the dismissal of US National Security Adviser Bolton before a recovery on an API inventory draw.  Improved risk conditions limited demand for precious metals.

The Euro was protected by continued speculation that the ECB might refrain from announcing further government bond purchases at Thursday’s policy meeting, although narrow ranges again prevailed given underlying uncertainty. As German yields moved higher, the Euro resisted selling pressure and EUR/USD settled around 1.1040 with marginal gains on Wednesday.

UK labour-market data recorded a smaller than expected increase in jobless claims of 28,200 for August and unemployment declined to 3.8% from 3.9%, although there was a notable slowdown in employment growth. Headline annual average earnings growth strengthened to 4.0% from an upwardly revised 3.8% previously and a fresh 9-year high while the underlying increase dipped slightly to 3.8% from 3.9%. Bank of England Governor Carney stated that he did not see negative interest rates as a tool in the UK, although he was uneasy over global growth trends.

A spokesman stated that the government was not seeking a backstop for Northern Ireland only and the political atmosphere calmed slightly following the suspension of parliament. GBP/USD was unable to hold 6-week gains near 1.2375 and faded to just below 1.2350 while GBP/EUR settled around 1.1200.

There were further rumours that Prime Minister Johnson was edging towards a compromise position on Ireland and Brexit which limited potential selling interest. GBP/USD traded just above 1.2350 on Wednesday with markets continuing to monitor domestic political rhetoric closely.

Economic Calendar