Sterling was boosted by strong average earnings data and further hopes that a ‘no-deal’ Brexit would be blocked.

Fresh doubts over US-China trade talks triggered renewed weakness in equity markets on Tuesday, although sentiment stabilised on Wednesday.

The decline in Bank of Japan inflation projections undermined the yen despite on-going concerns over risk conditions.

The dollar was mixed as the Euro and commodity currencies recovered from intra-day losses with a reluctance to commit to further US currency buying.

Oil prices also recovered to some extent from sharp losses with gold little changed.

Sterling was boosted by strong average earnings data and further hopes that a ‘no-deal’ Brexit would be blocked.

UK unemployment declined to 4.0% in the three months to December, below expectations of 4.1%, and employment increased strongly by 141,000 in the same period, although there was a further increase of over 20,000 in the claimant count. Headline average earnings increased 3.4% in the year from 3.3% and the strongest reading for over 10 years while core earnings were unchanged at 3.3%.

Government borrowing data had little impact with the second lowest December deficit for 18 years. Sterling had strengthened into the data and secured a further limited advance after the release.

Political jostling continued during the day with amendments to the government’s framework bill ahead of the next scheduled vote next Tuesday. Although there were no substantive developments, Sterling continued to make headway on expectations that parliament would manage to block a ‘no-deal’ Brexit or extend Article 50.

GBP/USD moved above 1.2950 while GBP/EUR held around 2-month highs at 1.1400. There was a slight early correction on Wednesday as uncertainty encouraged a paring of long positions, although Sterling held firm overall with further volatility expected.

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