Weaker risk appetite hampered Sterling on Wednesday with GBP/EUR around 1.1050.

Global equities declined sharply ahead of Christmas with US indices at 18-month lows before a rebound. A renewed deterioration in risk appetite and growth concerns triggered fresh losses on Wednesday.

Concerns over growth and Fed policies also unsettled the dollar with USD/JPY at 6-month lows after breaking below the key 110.00 level.

Oil also declined sharply to near 18-month lows and rallies continued to attract selling interest amid over-supply fears.

The Norwegian krone remained under pressure with EUR/NOK strengthening to 10-year highs on oil-sector weakness before a tentative correction.

Gold advanced to 6-month highs as silver also broke important resistance while US losses provided some protection to commodity currencies.

There were no significant domestic economic developments during the holiday period. Immediate political tensions also declined sharply with parliament in recess and no fresh Brexit developments.

Position adjustment was inevitably an important feature on the final trading day of 2018, especially given the increase in implied volatilities and substantial short speculative positions. Commercial selling often leaves Sterling vulnerable to late-year weakness, although there was also some evidence of short covering in choppy trading. GBP/USD briefly traded above 1.2800 before losing ground as GBP/EUR recovered strongly from lows below 1.1020.

Weaker risk appetite hampered Sterling on Wednesday with GBP/EUR around 1.1050, although there was GBP/USD support below 1.2750 given the fragile US dollar as markets looked to re-focus on political developments.

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