Sterling was hampered by a weaker tone surrounding global risk appetite.
Oil prices maintained a firm tone on Monday given disruption to Saudi Arabian supplies with volatility inevitably elevated. Brent hit resistance on approach to $70.0 p/b.
There was some relief that there was no immediate escalation in tensions and restrained US rhetoric which limited the contagion impact and wider market reactions were measured.
Overall risk appetite was resilient with only limited demand for defensive currencies. Equities posted net losses with caution ahead of key central bank meetings.
The dollar made significant net gains as yield spreads provided support with tightness in money markets also an important factor underpinning the US currency.
European currencies retreated with EUR/USD testing 1.1000 while Sterling corrected lower amid no further positive Brexit rhetoric.
Precious metals were unable to make headway as a firm US dollar offset the potential for defensive support.
President Trump again strongly criticised Federal Reserve policies with accusations that the central bank was clueless with higher oil prices seen as another reason to ease policy. He repeated his rant that the dollar is at its strongest ever even though the US currency is nowhere near an all-time high and the rhetoric had no significant market impact.
Sterling was hampered by a weaker tone surrounding global risk appetite on Monday, although higher oil prices provided slight support. Prime Minister Johnson described his meeting with EU Commission President Juncker as constructive, but admitted that more work needed to be done while Juncker stated that the UK had still not made any proposals which meet the objectives of the backstop. Johnson also reiterated that there would be no move to ask for a Brexit extension.
A lack of evidence of any breakthrough limited potential currency support, especially after strong criticism from the Luxembourg Prime Minister. Sterling was also subjected to a correction after strong gains seen on Friday with GBP/EUR finding support just below 1.1270. GBP/USD retreated to test 1.2400 against a firm dollar before recovering slightly with little change on Tuesday.
There was an element of caution ahead of central bank meetings this week with the Supreme Court also starting to hear the case against parliamentary prorogation case on Tuesday with a ruling potentially on Thursday.
|10:00||German ZEW Survey (Current Situation) (SEP)||-7.00||-13.5|
|10:00||German ZEW Survey (Economic Sentiment)(M/M)(SEP)||-28.5||-44.1|
|10:00||EUR Euro-Zone ZEW Survey (Economic Sentiment)(SEP)||-||-43.6|
|13:30||CAD Manufacturing Shipments (M/M)(JUL)||-1.70%||-1.20%|
|14:15||USD Capacity Utilization(AUG)||77.80%||77.50%|
|14:15||USD Industrial Production(AUG)||0.10%||-0.20%|
|15:00||NAHB Housing Market Index(SEP)||-||66|
|18:10||ECB Benoit Coeure Speaks||-||-|
|21:00||USD TIC Net Long-Term(JUL)||-||99.1B|
|23:45||NZD Current Account (Q/Q)||0.53B||0.68B|