Fears over global trade environment unsettled Sterling.

Trade tensions continued to dominate with further unease over US-China developments and no major economic data releases. Bond yields declined further, and equity markets remained fragile amid vulnerable risk conditions.

The dollar was hampered by increased speculation over a further Fed rate cut at the September Fed meeting, lower yields and intervention threat. Demand for defensive currencies remained firm with solid yen demand while the Chinese yuan lost ground.

Oil prices were undermined by demand fears and crude registered net losses despite a further API inventory draw. Gold posted fresh 6-year highs amid defensive demand, reduced cost of carry and a fragile dollar.

The Australian dollar dipped to 9-year lows as the Reserve Bank of New Zealand cut rates more aggressively than expected.

Following generally negative comments from EU officials on Monday, UK government officials insisted that they did want to reach a Brexit deal with the EU. Markets remained very uneasy over the situation with tensions inevitably set to increase further ahead of the late-August G7 meeting. According to reports, a cross-party group of MPs had launched legal action to prevent the government forcing a ‘no-deal’ outcome by suspending parliament.

Irish Prime Minister Varadkar stated that there is provision for alternative arrangements in a joint political declaration and attempts should be made to flesh out alternative arrangements by the end of October which provided only marginal relief.

Fears over the global trade environment also unsettled Sterling, although this was offset to some extent by expectations of very dovish stances by major central banks. GBP/USD failed to hold above 1.2200 and retreated to near 1.2150 while GBP/EUR found support above 1.0850.

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