Sterling recovered ground after slightly more hawkish comments from Bank of England Governor Carney.

The US dollar was boosted by strong data from the services sector, especially with expectations of US out-performance compared to Europe and the Euro remained weak.

Sterling recovered ground after slightly more hawkish comments from Bank of England Governor Carney, but a lack of positive Brexit rhetoric restrained demand.

The Australian dollar declined sharply after a miss on Q4 GDP data and commodity currencies overall lost support.

Oil prices were hit by a larger than expected API inventory build with further choppy trading.

Equity markets were mixed with some net support from gains in China amid hopes of further stimulus measures.

The UK PMI services sector index strengthened to 51.3 for February from 50.1 which above consensus forecasts and avoided a dip into contraction territory. Underlying components were weak, however, with Brexit uncertainty contributing to a lack of new orders while employment declined. The data also suggested that first-quarter GDP would be held to around 0.1%.

Sterling briefly recovered ground after the data before retreating once again following comments from UK officials that a breakthrough was unlikely in Tuesday’s talks with the EU. According to Labour Party’s McDonnell few opposition MPs would back the Brexit deal and GBP/USD hit lows of 1.3100 while GBP/EUR fell to around 1.1570.

Bank of England Governor Carney stated that the market path of implied interest rates may not be high enough which triggered fresh Sterling demand. GBP/USD recovered to 1.3170 while GBP/EUR retreated back below 1.1570.

Brexit talks with the EU reportedly failed to make a breakthrough, although there were no media briefings which increased uncertainty and talks will resume on Wednesday. GBP/USD retreated back below 1.3150 on speculation that talks were deadlocked.

Economic Calendar