Sterling continued to gain ground and posted 2-month highs as markets expected that a ‘no-deal’ Brexit would be rejected within parliament.

EUR/USD was unable to make headway with narrow ranges as firm US data helped underpin the dollar while cross-related flows had a strong influence on the pair.

Sterling continued to gain ground and posted 2-month highs as markets expected that a ‘no-deal’ Brexit would be rejected within parliament.

Risk appetite strengthened later in New York on reports that the US could lift tariffs on China. Commodity currencies recovered some ground while demand for defensive currencies faded.

Global equity markets made gains on trade hopes even with no formal statements from officials.

Oil prices also made headway while gold was resilient despite the solid dollar tone.

The latest Bank of England credit survey reported that lenders expected a slowdown in demand for housing finance over the next quarter, reinforcing unease over the housing sector as Brexit uncertainty weighed on domestic sentiment.

Chief Negotiator Barnier stated that the EU would move immediately if the UK’s red lines moved and that it was willing to extend talks beyond free trade. Domestically, there were talks between government Ministers and representatives of other parties, although Labour Leader Corbyn demanded that a ‘no-deal’ Brexit had to be ruled out before talks could take place.

The government confirmed that it will present plans for next steps on Monday. There was further speculation that the promise of another referendum would be needed to break the impasse. Markets overall continued to consider than the risks of a ‘no-deal’ Brexit had fallen further which supported Sterling, especially as implied volatilities declined to two-month lows.

The UK currency pushed to 2-month highs as GBP/USD touched the 1.3000 level and GBP/EUR rallied above 1.1400. Sterling corrected slightly on Friday with GBP/USD near 1.2970, although sentiment held firm as oil prices made gains.

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