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.

Economic Calendar

07:45Business Confidence--
08:00World Economic Forum Annual Meeting--
09:30BoE Broadbent Speech--
10:405-Year Bobl Auction--0.22%
11:00CBI Business Optimism Index--16
11:00CBI Industrial Trends Orders58
12:00MBA Mortgage Applications-13.50%
12:00MBA 30-Year Mortgage Rate-4.74%
13:30Retail Sales Ex Autos MoM-0.40%0%
13:30Retail Sales YoY-0.60%
13:30Retail Sales MoM-0.60%0.30%
13:55Redbook YoY-6.70%
13:55Redbook MoM--1.70%
14:00House Price Index MoM0.20%0.30%
15:00Consumer Confidence Flash-6.5-6.2
15:00Richmond Fed Manufacturing Index-6-8
21:30API Crude Oil Stock Change--0.56M
22:00CommBank Australia Composite PMI Flash-52.9
22:00CommBank Australia Services PMI Flash-52.7
22:00CommBank Australia Manufacturing PMI Flash-54
23:50Foreign Bond Investment-¥2209.9B

*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.