Political headlines triggered high Sterling volatility with net losses as the government remained under intense pressure as the Brexit debate started.

US bond yields continued to decline with a further flattening of the yield curve.

US equity markets also moved sharply lower on growth doubts and fresh unease over trade policies following mixed US rhetoric with Nasdaq losses of 3.8%.

After initial losses the dollar reversed sharply against European currencies to post net gains as support levels for the US index also held.

Political headlines triggered high Sterling volatility with net losses as the government remained under intense pressure as the Brexit debate started.

Oil prices were hit by weaker risk appetite and an inventory build while precious metals retreated from highs.

Sterling gained support in early Europe on Tuesday from a ruling by the European Court of Justice Advocate General that the UK could revoke the Article 50 declaration to leave the EU. This judgement increased speculation that the UK would be able to avoid a ‘no-deal’ Brexit and helped underpin the UK currency.

The UK PMI construction index strengthened to a four-month high of 53.4 for November from 53.2 previously and above consensus expectations while employment strengthened at the fastest pace since December 2015. There was only limited reaction as GBP/EUR found support below 1.1180 while GBP/USD failed to hold above 1.2800.

Parliament ruled that the government was in contempt of court over the decision not to release full legal guidance which triggered a fresh round of Sterling selling with a GBP/USD slide below 1.2700. Overall political uncertainty dominated Sterling as an intense Brexit debate started. There was a high degree of uncertainty over implications of an expected government defeat next week as parliament looked to gain greater control. Weaker risk appetite also hit support with GBP/USD below 1.2700 and GBP/EUR near 1.1180.

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