Sterling dipped sharply after the UK Attorney General failed to change his legal verdict on the Brexit deal.

Sterling dipped sharply after the UK Attorney General failed to change his legal verdict on the Brexit deal. The government lost the key vote, intensifying political uncertainty.

US CPI inflation data was benign which curbed potential dollar demand and US yields declined with expectations of a dovish Fed policy.

EUR/USD made net headway despite European political concerns.

The US inflation data also underpinned global risk appetite, although the mood was more cautious in Asia on Wednesday as global growth concerns and trade uncertainty persisted.

Oil prices were supported by supply factors and an unexpected API inventory draw.

Precious metals made headway, especially with a softer US dollar tone as gold regained $1,300 per ounce.

Firm UK data had very little impact as political events dominated. Manufacturing output registered a 0.8% January increase after a 0.7% December slide while January GDP recovered 0.5% for a year-on-year increase of 1.4% from 1.0% previously.

Sterling initially corrected after sharp gains and losses accelerated rapidly following publication of the Attorney General’s legal advice. Cox stated that the overall legal risks of being trapped in a backstop had declined, but still existed. The statement increased expectations that the House of Commons would not back the government’s deal and GBP/USD declined sharply to lows near 1.3000 with GBP/EUR near 1.1560. There was, however, a notable rally early in the New York session in very volatile conditions.

Prime Minister May lost the Brexit deal vote by a margin of 149 as the Northern Irish DUP and over 70 Conservative MPs again voted against the deal. Sterling registered net losses, although the impact was lessened by expectations that a ‘no-deal’ outcome would be rejected in Wednesday’s vote. GBP/USD consolidated around 1.3100 with GBP/EUR around 1.1620 with markets braced for further very choppy trading given extremely high political uncertainty.

Economic Calendar

08:30European Central Bank Yves Mersch Speech--
10:00Euro-Zone Industrial Production (Y/Y)(JAN)-2.10%-4.20%
10:00Euro-Zone Industrial Production (M/M)(JAN)1.00%-0.90%
12:30USD PPI (M/M)(FEB)0.20%-0.10%
12:30USD PPI Ex Food & Energy (Y/Y)(FEB)2.60%2.60%
12:30USD PPI (Y/Y)(FEB)1.90%2.00%
12:30USD PPI Ex Food & Energy (M/M)(FEB)0.20%0.30%
12:30GBP Annual Budget Release(Y/Y)--
12:30USD Durable Goods Orders (M/M)(JAN)-0.50%1.20%
12:30USD Durable Goods Orders Ex Transportation(JAN)0.10%0.10%
14:00USD Construction Spending (M/M)(JAN)0.40%-0.60%
14:30USD Crude Oil Inventories2.861M7.069M
17:00ECB Benoit Coeure Speaks--
23:50JPY Buying Foreign Bonds(JAN 23)-453.1B

*All rates shown are indicative of interbank rates and should only be used for indication purposes only. It is important to note that foreign exchange rates fluctuate and that rates may vary depending on the amount and the base currency that is purchased or sold. Rates are correct as of 8:00am UK time. CentralFX are not responsible for the rates shown.