Sterling came under renewed pressure on Brexit stalemate.

After a brief respite, Sterling came under renewed pressure on Brexit stalemate and reports that the Prime Minister May would be subjected to a leadership challenge.

A wider loss of confidence in European currencies amid political tensions again underpinned the dollar, especially as US bond yields also edged higher.

US equities closed mixed as uncertainty prevailed while hopes for US-China trade progress helped to underpin sentiment in Asia on Wednesday.

Oil prices were boosted by a strong API inventory draw, although gains were still limited.

UK unemployment remained at 4.1% in the 3 months to October, in line with consensus forecasts while there was a larger than expected increase in jobless claims of close to 22,000 for November. The annual increase in weekly average earnings strengthened to an 8-year high of 3.3% from an upwardly-revised 3.1% with the underlying increase also at 3.3% from 3.2%. The data maintained underlying pressure for gradual interest rate hikes, although political developments dominated.

The government stated that the Brexit vote would be brought back to parliament by January 21st.

Prime Minister May embarked on a European tour in to secure concessions from the EU, there was no sign of movement from EU officials on fresh negotiations, although there were hints that there would be fresh wording on the backstop to provide reassurance that it would not last indefinitely.

Sterling declined sharply late in the European session following reports that there were enough letters to mount a leadership challenge on May and underlying instability continued to undermine sentiment although there was no official confirmation of a vote. GBP/USD dipped to 20-month lows below 1.2500 while GBP/EUR fell to 1.1025 and touched fresh 3-month low below 1.1002 with UK weakness persisting on Wednesday.

Economic Calendar

10:00 EUREuro-Zone Industrial Production (Y/Y)0.70%0.90%
13:30 USDUS CPI Ex Food & Energy (Y/Y)2.20%2.10%
13:30 USDUS CPI (Y/Y)2.20%2.50%
19:00 USDUS Monthly Budget Statement-188.0B-100.0B

*All rates shown are indicative of interbank rates and should only be used for indication purposes only. It is important to note that foreign exchange rates fluctuate and that rates may vary depending on the amount and the base currency that is purchased or sold. Rates are correct as of 8:00am UK time. CentralFX are not responsible for the rates shown.