Sterling was hit by a measured correction after strong gains on Friday with political uncertainty dominating sentiment.

Expectations of a dovish Fed stance continued to undermine US dollar support with the dollar index close to 2-week lows and tentative EUR/USD gains.

US earnings misses and US-China trade concerns undermined global equity markets, especially after US action against Huawei although with some resilience at lower levels.

After losses on demand concerns, oil also secured a limited recovery.

Sterling was hit by a measured correction after strong gains on Friday with political uncertainty dominating sentiment.

Precious metals held a robust tone with gold advancing to fresh 7-month highs.

The House of Commons Brexit Select Committee reiterated that a managed ‘no deal’ Brexit could not be the policy of any responsible government which helped underpin Sterling, but the currency was still subjected to a correction during the day.

There were notably cautious comments from EU negotiator Weyand who stated that there was no room to change the Withdrawal Agreement while the chances of the UK crashing out of the EU without a deal were now very high.

Given the high degree of uncertainty and potential permutations surrounding Amendments to Tuesday’s Government vote, Sterling was unable to regain ground, especially with doubts whether there would be majority support for any alternative.

The UK currency was also hampered by a renewed decline in global risk appetite and sharp retreat in oil prices with markets also wary over potential month-end selling pressures. There was GBP/USD support below 1.3150 against the dollar while EUR/GBP held firm around 1.1500.

Sterling drifted in early Europe on Tuesday as markets waited for further political developments amid high uncertainty with the government pushing for MPs to back the Brady Amendment to replace the backstop.

Economic Calendar

07:00CHF Trade Balance(DEC, 2018)4.550B4.737B
13:30USD Goods Trade Balance(NOV, 2018)--76.98B
15:00USD CB Consumer Confidence(JAN)124128.1
23:50JPY Retail Trade (Y/Y)(DEC, 2018)0.80%1.40%

*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.