Sterling gains due to Prime Minister May winning a Conservative Party confidence vote were limited.

Sterling gains due to Prime Minister May winning a Conservative Party confidence vote were limited by the extent of opposition and on-going fears over Brexit deadlock.

A net improvement in Euro-zone political confidence helped underpin the Euro as the dollar overall edged lower on the 2019 outlook with little lead from in-line US CPI data.

Global equities made net headway on hopes for improvement in US-China trade relations, although underlying caution prevailed.

Oil prices were hampered by persistent supply fears with only limited support from firmer risk conditions.

Gold drifted lower, although silver posted 5-week highs and pushed towards key resistance areas.

Sterling dipped lower in early Europe on Wednesday following confirmation that Prime Minister May would face a no-confidence vote as leader of the Conservative Party. GBP/USD did find support below 1.2500 and gradually regained ground while increased confidence that May would win the vote helped trigger sharper Sterling gains later in the session. German Chancellor Merkel also stated that she remained confident of an orderly Brexit as there was still time.

The UK currency maintained a firm tone ahead of the result and May did win the confidence ballot. The margin of victory, however, was narrower than expected with 117 MPs voting against the Prime Minister. There were, therefore, expectations of an important loss of authority, maintaining market fears over underlying instability and Brexit deadlock. In this environment, Sterling dipped following the result, although there was GBP/USD support below 1.2600.

Rhetoric at the EU Council meeting will be monitored closely and Sterling was also hampered by underlying economic concerns following another weak RICS housing survey and GBP/EUR held just above the 1.1100 level with markets wary over a lack underlying support.

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