Major currencies traded in narrow ranges during Tuesday with markets waiting for fresh incentives.

Major currencies traded in narrow ranges during Tuesday with markets waiting for fresh incentives while uncertainty over trade policies-maintained uncertainty.

US bond yields drifted lower which sapped potential dollar support as it retreated to near 11-week lows and EUR/USD registered limited gains. Sterling was underpinned by stronger than expected wages data.

Commodity currencies lost ground amid unease over global growth trends and the potential for weak demand conditions. Oil prices were damaged by an unexpected build in API crude inventories.

After sharp losses following lower than expected inflation data, the Norwegian krone recovered some ground.

UK unemployment held at 3.8% according to the latest data, in line with consensus forecasts. There was a slightly larger than expected increase in the jobless claimant count while employment growth slowed. The headline increase in average earnings slowed to 3.1% from 3.3%, although this was above consensus forecasts of 2.9% and underlying growth strengthened to 3.4% from 3.3%.

The stronger than expected earnings data bolstered expectations that the Bank of England could move to raise interest rates and Sterling moved higher. Bank of England Deputy Governor Broadbent stated that interest rates were likely to move higher over the medium term. There were generally downbeat comments from Bank of England MPC member Vlieghe who stated that data since May had been disappointing and that downside risks had intensified.

The earnings data also provided underlying support and Sterling was able to make net gains, especially with expectations of very dovish central bank policies elsewhere providing significant Sterling support in relative terms. GBP/USD traded above 1.2700 on Wednesday, although GBP/EUR was able to hold just above 1.1200.

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