Risk appetite remained fragile amid further geo-political concerns over Iran as the US imposed further sanctions.

The US dollar remained on the defensive with strong expectations that the Federal Reserve would cut interest rates soon and the currency index dipped to 3-month lows.

Risk appetite remained fragile amid further geo-political concerns over Iran as the US imposed further sanctions.

The yen and Swiss franc gained important defensive support with USD/JPY at fresh 5-month lows below 107.00 while EUR/USD tested above 1.1400.

Equities registered net losses while US 10-year bond yields dipped back below 2.00%. Despite supply fears, gains in oil prices were limited by underlying demand concerns.

Gold also continued to gain strong support with fresh 5-year highs. Bitcoin pushed higher again with fresh 14-month highs above $11,200.

Sterling moved higher in early Europe on Monday with some speculation that Johnson could lose some ground in the Conservative Party leadership race. There were also reports that a number of party MPs would be prepared to bring down the government rather than accept a ‘no-deal’ Brexit. In relative terms, the expected Bank of England monetary stance continued to provide an element of Sterling support given expectations that the Federal Reserve and ECB would lower interest rates and immediate global developments tended to overshadow underlying political concerns.

GBP/USD pushed to 1-month highs above 1.2760, but was unable to extend gains through a significant technical area and lost some traction in New York, although there was support above 1.2700. GBP/EUR held just above the 1.1170 level.

Boris Johnson stated that he did not believe that the UK would leave the EU without a deal, but that he was willing to do so. Sterling was little changed on Tuesday with US weakness again the main element.

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