Sterling strengthened sharply on Friday amid hopes for Brexit progress.

Over the weekend, key Saudi Arabian oil facilities were hit by drone attacks with the country’s production capacity cut by around 50% while the US blamed Iran for the attacks.

Oil prices spiked over 15% to 4-month highs before a correction with Brent trading 10% higher at the European open.

Risk appetite also declined, especially after disappointing Chinese data and aggressive US rhetoric with global equities losing ground, although selling pressure was limited.

Bond markets partially corrected Friday’s sharp losses, but US 10-year yields still traded near 6-week highs at 1.90%.

The dollar was little changed overall as the yen pared losses with EUR/USD selling near 1.1100. The Canadian dollar and Norwegian krone pared Friday’s losses as crude moved sharply higher.

Sterling strengthened sharply on Friday amid hopes for Brexit progress before a limited correction on Monday. Precious metals also recovered from losses seen on Friday as fears over Middle East instability increased.

There was slightly more positive rhetoric from EU diplomats on Friday with comments that there had been serious engagement on Brexit talks for the first time while Prime Minister Johnson stated that the rough shape of a deal to be done could now be seen. Political hopes helped underpin Sterling, especially with stronger global risk appetite. GBP/USD pushed to 7-week highs around 1.2500 while GBP/EUR rose to 3-month highs near 1.1288.

CFTC data recorded a fresh increase in short, non-commercial positions to near 2-year highs, maintaining the potential for short covering if political sentiment improves. Prime Minister Johnson is set to meet EU Commission President Juncker on Monday with the overall rhetoric tone watched closely. The UK currency corrected lower on Monday as markets monitored oil and global risk conditions. GBP/USD traded around 1.2465 in choppy trading conditions with political tensions high.

Economic Calendar

07:45ECB Benoit Coeure Speaks--
09:00CPI (EU Norm) Prelim MM(AUG)0.50%0.50%
09:00CPI (EU Norm) Prelim YY(AUG)0.10%0.10%
09:00CPI (EU Norm) Final MM*(AUG)-1.70%-1.70%
09:00CPI (EU Norm) Final YY*(AUG)0.40%0.40%
13:30NY Empire State Manufacturing Index(SEP)34.80
13:30CAD Foreign Securities Purchase(JUL)--3.98B
22:00NZD Westpac Consumer Sentiment-103.50

*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.