Sterling moved sharply lower in early Europe on Tuesday as political events dominated

Sterling moved sharply lower in early Europe on Tuesday as political events dominated.

The dollar secured net gains as further expectations of month-end capital repatriation and no overtly dovish Fed comments underpinned support.

The Euro was undermined by reports that the US would impose tariffs on EU car exports while political concerns continued to undermine Sterling.

Despite the high element of uncertainty, equity markets made net gains with hopes that there would be progress on US-China trade talks.

Oil prices demonstrated some resilience and bounced from near13-month lows despite an API inventory build, but gold and silver registered net losses.

Cryptocurrencies rallied as risk conditions improved.

Sterling moved sharply lower in early Europe on Tuesday as political events dominated. Former Cabinet Minister Fallon stated that the current Brexit agreement had no chance of being approved and should be re-negotiated. Following President Trump’s trade comments, underlying sentiment deteriorated further and GBP/USD declined to below 1.2770.

The CBI retail sales index strengthened to 19 from 5 previously and above consensus expectations and retailers expected a strong December performance, although there were still underlying concerns with investment remaining vulnerable. BRC data recorded a 0.1% increase in shop prices in the year to November from -0.2% previously.

Political fears continued to damage Sterling with markets still seeing no real chance that the Brexit deal would be approved. According to EU’s Barnier, the Brexit deal would be referred back to the European Council if the UK parliament votes against it on December 11th. GBP/EUR advanced to 1.130 despite wider losses while GBP/USD dipped below 1.2750. Markets will be waiting for Wednesday’s publication of long-term Brexit economic forecasts by the Treasury with expectations that the Brexit deal would involve a loss of output relative to staying in the EU.

Economic Calendar

Expected Previous
13:30 USD US GDP (Annualized) 3.50% 3.50%
17:30 GBP UK Bank Stress Test Results - -
17:45 GBP BOE Gov Carney Speaks - -
18:00 USD Fed Chair Powell Speaks - -

*All rates shown are indicative of interbank rates and should only be used for indication purposes only. It is important to note that foreign exchange rates fluctuate and that rates may vary depending on the amount and the base currency that is purchased or sold. Rates are correct as of 8:00am UK time. CentralFX are not responsible for the rates shown.