Sterling recovered some losses during Monday with selling curbed by expectations that parliament would block a ‘no-deal’ Brexit outcome.
The dollar registered net gains with support from expectations of US out-performance as global growth concerns persisted.
Activity in equity markets were curbed by Monday’s US holiday, but US futures weakened on Tuesday and Asian bourses retreated.
Oil prices also lost ground on Tuesday as Chinese growth doubts undermined sentiment.
Commodity currencies remained on the defensive and silver registered losses, although gold was resilient.
The IMF downgrading of its global growth forecasts for 2019 and 2020 provided some net dollar support, especially given the downbeat assessment of the Euro-zone and a fresh warning over the Italian debt outlook. Markets were also expecting a broadly dovish meeting from the ECB at Thursday’s meeting which sapped potential currency support.
Sterling recovered some losses during Monday with selling curbed by expectations that parliament would block a ‘no-deal’ Brexit outcome.
Political speculation continued to dominate Sterling in early Europe ahead of latest developments in parliament. The UK currency lost ground in early Europe as Brexit deadlock continued. There was a gradual recovery ahead of the New York open with further speculation over efforts to resolve the Northern Ireland issue, but tough rhetoric from EU officials limited potential gains. GBP/USD dipped to lows near 1.2830 as EUR/GBP closed below 1.1300.
Prime Minister May’s update on Brexit reiterated that discussions would continue and there were some hopes of movement on the Northern Ireland backstop issue. She also promised increased flexibility on future-relationship negotiations and Sterling regained some ground amid expectations that a ‘no-deal’ outcome would be rejected in parliament or that the EU Withdrawal would be postponed through an extension of Article 50.
The opposition Labour Party also moved closer to backing another referendum. Gilt yields moved higher and GBP/USD recovered to near 1.2900. Sterling edged lower on Tuesday as weaker global risk conditions curbed support. The latest labour-market data is due later with political developments set to maintain choppy Sterling moves.
Economic Calendar
| Expected | Previous | ||
|---|---|---|---|
| 09:30 | GBP Average Earning Including Bonus(NOV, 2018) | 3.00% | 3.30% |
| 09:30 | GBP Claimant Count Change(M/M)(DEC, 2018) | 20.0K | 21.9K |
| 09:30 | GBP Unemployment Rate(NOV, 2018) | 4.10% | 4.10% |
| 09:30 | GBP Public Sector Net Borrowing(DEC, 2018) | 1.20B | 6.35B |
| 10:00 | German ZEW Survey (Economic Sentiment)(M/M)(JAN) | - | -17.5 |
| 10:00 | German ZEW Survey (Current Situation) (JAN) | - | 45.3 |
| 10:00 | EUR Euro-Zone ZEW Survey (Economic Sentiment)(JAN) | -20.1 | -21 |
| 13:30 | CAD Manufacturing Shipments (M/M)(NOV, 2018) | 0.40% | -0.10% |
| 13:30 | CAD Wholesale Sales (M/M)(NOV, 2018) | 0.40% | 1.00% |
| 15:00 | USD Existing Home Sales(DEC, 2018) | 5.20M | 5.32M |
| 15:00 | USD Existing Home Sales Change(DEC, 2018) | -0.60% | 1.90% |
| 21:45 | NZD CPI (Q/Q) | 0.70% | 0.90% |
| 21:45 | NZD CPI (Y/Y) | 1.70% | 1.90% |
| 23:50 | JPY Exports (Y/Y)(DEC, 2018) | 19:12 | 0.1 |
| 23:50 | JPY Merchandise Trade Balance Total(DEC, 2018) | -600B | -738B |
| 23:50 | JPY Merchandise Adjusted Trade Balance(OCT, 2016) | - | -492.2B |