Sterling dipped sharply after a ministerial resignation and severe tensions within the Conservative Party undermined hopes for a Brexit deal.

Sterling dipped sharply after a ministerial resignation and severe tensions within the Conservative Party undermined hopes for a Brexit deal

The dollar maintained a strong tone on expectations of higher interest rates following relatively hawkish Fed rhetoric and underlying yield support.

Sterling dipped sharply after a ministerial resignation and severe tensions within the Conservative Party undermined hopes for a Brexit deal.

The Euro also lost support and EUR/USD dipped to 16-month lows below 1.1300.

Oil prices weakened further on supply concerns with WTI at 8-month lows before a correction on Monday following reports of Saudi production cuts.

Asian equities secured a tentative rebound on Monday while gold and silver remained under pressure amid US strength.

UK third-quarter GDP data met consensus forecasts with a 0.6% increase from 0.4% previously and the year-on-year increase met expectations at 1.5%. Other growth-orientated data was mixed with construction data stronger than expected, but investment declined. There was also a narrowing of the trade deficit to 7-month lows and the impact was limited.

Sterling was hampered by an underlying tone of opposition to the UK government’s potential Brexit deal. Late in Europe, junior Minister Jo Johnson also resigned and demanded that there should be a second referendum on any deal. With the Northern Ireland DUP also expressing concerns, Sterling lost ground with a GBP/USD dip below 1.3000.

CFTC data registered a small increase in net short positions, maintaining the risk of sharp Sterling gains if there is a political breakthrough. Overall tensions, however, remained very high with Conservative Party divisions and uncertainty. Reports also indicated that plans for a Monday Cabinet meeting had been cancelled which triggered further doubts over the ability to secure a November deal. GBP/USD dipped below 1.2900 amid dollar strength as GBP/EUR fell to the 1.1400 area.

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