The dollar was undermined by the fragile data and dovish Fed rhetoric with a slide to 3-month lows.

US PMI business confidence data was below consensus forecasts with the manufacturing index at a 9-year low, reinforcing doubts over the outlook.

Rhetoric from Federal Reserve officials remained dovish and fuelled strong market expectations of interest rate cuts.

The dollar was undermined by the fragile data and dovish Fed rhetoric with a slide to 3-month lows as commodity currencies secured tentative gains.

The Euro gained some support from a limited recovery in Euro-zone PMI data, although US losses were crucial in triggering EUR/USD gains.

US-Iran tensions continued to provide strong support to oil prices with crude at fresh 3-week highs.

Gold also drew support from geo-political concerns and a weaker US dollar and traded near 5-year highs. Bitcoin pushed sharply higher again with 14-month highs above $11000.

Bank of England Governor Carney rejected claims from Conservative Party leadership candidate Johnson that the UK could avoid EU tariffs in the event of a ‘no-deal’ Brexit. Given that Johnson remains a strong favourite to win the contest, Sterling sentiment remained fragile amid underlying political uncertainty, although the media focussed more on personal issues.

Given the battle for major EU posts, there were also major uncertainties over the potential for fresh negotiations, increasing the risk of severe tensions ahead of the October 31st Brexit deadline GBP/EUR fell back to 1.1200 on a firm Euro, but GBP/USD advanced to near 1.2750 as global market moves also had an important influence.

CFTC data recorded a further increase in short positions to 4-month highs, increasing the risk of short liquidation if there is a shift in sentiment. Speculation that the House of Commons would look to block any ‘no-deal’ Brexit helped underpin sentiment and Sterling was little changed on Monday as GBP/USD edged above 1.2750.

Economic Calendar