European currencies regained some ground with Sterling out-performing the Euro on some speculation over Brexit progress.

The dollar lost ground on Tuesday on expectations of a dovish Fed while reports that the US would push for a stable yuan triggered concerns over a wider US weak-dollar policy.

There were also hopes for progress on US-China trade talks which underpinned equity markets while the yen lost ground as defensive yen support faded.

European currencies regained some ground with Sterling out-performing the Euro on some speculation over Brexit progress.

Commodity currencies also regained ground as the US dollar faded.

Dollar weakness helped trigger sharp gains for precious metals with gold at 10-month highs.

Oil prices also benefitted from a weaker dollar with global benchmarks close to 3-month highs.

UK unemployment remained at 4.0% in the three months to December, in line with consensus forecasts. There was a larger than expected increase in the jobless claimant count, but employment hit a fresh record high. Headline annual average earnings growth was unchanged at 3.4%, fractionally below expectations of 3.5%, with the core reading unchanged at 3.4%.

There were further parliamentary moves to ensure that a ‘no-deal Brexit is ruled out and Sterling started to move higher into the New York open. Talks between Prime Minister May and EU Commission President Juncker were described as significant. The UK will also present its prosed changes to the deal on Wednesday and there was increased speculation that there could be a breakthrough, although uncertainty inevitably remained very high with ‘no-deal’ reports continuing to swirl and tensions in parliament remained intense amid expectations of further defections to the independent group.

Sterling pushed sharply higher with a GBP/USD break above 1.3000 helping to trigger further buying to 2-week highs above 1.3050 before a limited correction while EUR/GBP rallied above 1.1500.

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