GBP/USD briefly broke to fresh 5-month highs above 1.3000.
The US dollar secured only a slight recovery from 9-week lows with a lack of underlying demand as other major currencies secured increased backing.
EUR/USD edged to fresh 2-month highs at 1.1180 as German yields increased before fading later in the day. Sterling posted net gains on Brexit hopes and underlying short covering, but GBP/USD failed above 1.3000 amid on-going parliamentary stresses.
Commodity currencies held firm with the Canadian dollar at 3-month highs even with fragile oil prices. Oil prices were hampered by underlying demand concerns despite firm equity markets
Demand for precious metals was subdued despite the fragile US dollar.
The dollar continued to lose ground against commodity currencies and the soft US tone helped push EUR/USD to marginal 9-week highs near 1.1180. There were no significant US data releases and the Federal Reserve entered the blackout period with no comments ahead of next week’s policy meeting. Futures priced in around a 90% chance of a Fed rate cut.
On Monday, the Northern Ireland DUP indicated that they would not back a Customs Union amendment to the latest Brexit agreement which provided net Sterling support. GBP/USD briefly broke to fresh 5-month highs above 1.3000 and GBP/EUR held around 1.1630 as underlying demand remained firm. Firmer global investor sentiment and gains in commodity prices also helped underpin the UK currency even with a net decline in oil prices.
There was GBP/USD selling interest above 1.3000 and House of Commons Speaker Bercow ruled that the government could not hold a vote on the Brexit deal during Monday. The pair drifted towards 1.2950 amid on-going House of Commons wrangling with GBP/EUR settling close to 1.1630.
The government introduced the Withdrawal Act Bill and is aiming to secure House of Commons approval within three days. A second-reading vote is scheduled for Tuesday and approval would boost Sterling while defeat would represent a fresh setback. There are also major procedural barriers to rapid approval and any further setbacks would make it impossible to secure an EU exit on October 31st. Sentiment held steady on Tuesday with GBP/USD trading below 1.3000.
Economic Calendar
| Expected | Previous | ||
|---|---|---|---|
| 09:30 | GBP Public Sector Net Borrowing(SEP) | 6.60B | 5.77B |
| 11:00 | GBP CBI Industrial Trends Orders (OCT) | -18 | -28 |
| 13:30 | CAD Retail Sales Ex Autos (M/M)(AUG) | 0.30% | -0.10% |
| 13:30 | CAD Retail Sales (M/M)(AUG) | 0.60% | 0.40% |
| 15:00 | USD Existing Home Sales(OCT) | 5.37M | 5.49M |
| 15:00 | USD Existing Home Sales Change(OCT) | -0.40% | 1.30% |
| 22:45 | NZD Trade Balance (M/M)(SEP) | - | -1.565M |
| 22:45 | NZD Trade Balance (Y/Y)(SEP) | - | -5.480M |