Sterling was subjected to heavy selling amid political chaos.

Sterling was subjected to heavy selling amid political chaos after the government postponed Tuesday’s planned Brexit parliamentary vote.

A wider loss of confidence in European currencies supported the dollar with sharp EUR/USD losses from initial highs despite underlying concerns surrounding US fundamentals.

US equities recovered from intra-day lows, although sentiment remained fragile as global growth concerns persisted.

Commodity currencies were unable to secure sustained support with crude sentiment also weak while precious metals were little changed.

UK third-quarter GDP data was in line with consensus forecasts and unrevised at 0.4%, although industrial production was weak as a slide in car output hurt activity. The data impact was limited as political developments quickly dominated markets. Sterling briefly ticked higher after the European Court of Justice confirmed that the UK could unilaterally revoke Article 50.

During the European session there were reports of an emergency Cabinet meeting and sources indicated that Tuesday’s scheduled Brexit vote in parliament would be postponed. Concerns surrounding government weakness intensified and Sterling came under sustained selling pressure as market confidence crumbled. The government confirmed that the Brexit vote would be delayed with May looking to secure additional reassurances from the EU over the Irish backstop issue.

After a brief respite, Sterling declined sharply again during Prime Minister May’s statement to parliament with 20-month GBP/USD lows near 1.2500 while GBP/EUR pushed to 3-month lows near 1.1000. Sterling secured only a limited correction and GBP/USD traded below 1.2600 with wariness over a potential no-confidence vote in May and de-stabilising political divisions.

Economic Calendar