The US dollar declined to 9-week lows as markets continued to price in further Fed rate cuts.

The US dollar declined to 9-week lows as markets continued to price in a further Fed rate cut with more positive European sentiment and narrower yield spreads also factors.

Political events remained very important with a major focus on Brexit developments.

Sterling posted net gains on Friday before retreating on Monday as the government failed to secure immediate House of Commons backing for the revised UK-EU deal.

EUR/USD also faded slightly from 9-week highs above 1.1170. Global equity markets edged lower amid underlying earnings reservations.

Oil prices were again hampered by underlying demand concerns. Commodity currencies made significant net gains on US dollar losses with AUD/USD at 1-month highs.

Hopes of a Brexit resolution also provided an element of Euro support with 2-month EUR/USD highs around 1.1170. With no weekend Brexit resolution, EUR/USD retreated slightly to near 1.1150 on Monday with the US currency recovering slightly.

Bank of England Deputy Governor Ramsden stated that a smooth Brexit outcome would put interest rate increases back on the agenda which provided an element of Sterling support in early trading on Friday.

There was a high degree of uncertainty whether the House of Commons would pass the new Brexit deal with the vote expected to be extremely close. After little change for much of the day Sterling strengthened after the European close on positive sentiment. GBP/USD pushed to near 1.2970 and close to 5-month highs.

CFTC data continued to record a substantial short Sterling position, maintaining the scope for short covering if there are positive developments.

On Saturday, an amendment was passed which effectively withheld any final approval of the Brexit deal until parliamentary legislation was completed and the main vote was postponed. Prime Minister Johnson technically complied with legislation to ask the EU for an extension for 3 months, but the letter was unsigned and he also sent another signed letter stating that it was a bad idea.

The EU will wait to assess UK developments and further House of Commons votes this week will maintain major uncertainty. Sterling registered net losses with GBP/USD trading just above 1.2900 on Monday and GBP/EUR around 1.1600.

Economic Calendar