The formation of a Labour Party splinter group temporarily pulled the market focus away from Brexit headlines during Monday.

Narrow ranges prevailed on Monday with little direction as US markets were closed for holidays.

The dollar recovered from initial losses as European currencies were unable to sustain gains given that important fundamental reservations continued.

The Australian dollar retreated after dovish Reserve Bank minutes with commodity currencies also fading.

Overall risk appetite held firm, although markets were waiting for further US-China trade developments with Asian equity markets little changed on Tuesday.

Supply concerns underpinned oil prices with benchmarks close to 3-month highs on hopes for tighter supplies.

Cryptocurrencies made further gains with bitcoin at 5-week highs.

The formation of a Labour Party splinter group temporarily pulled the market focus away from Brexit headlines during Monday. There were likely to be mixed implications for the Brexit debate and the Sterling reaction was limited, although underlying uncertainty increased slightly given complexities in the House of Commons ahead of key votes due next week.

Irish Foreign Minister Coveney reiterated that there was no appetite across the EU to change the Withdrawal Agreement. Brexit Secretary Barclay stated that he had a positive meeting with EU Chief Negotiator Barnier with another meeting planned for midweek, although with no evidence of substantive developments.

GBP/USD held above 1.2900 with a slightly softer tone on Tuesday as the US currency made some headway while GBP/EUR settled close to 1.1400. The latest UK labour-market data will be released on Tuesday with consensus forecasts of a further small increase in annual wages growth. Any acceleration would maintain expectations of further medium-term Bank of England rate hikes while a weaker release would tend to weaken the UK currency.

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