Sterling rallies on positive rhetoric were sold quickly amid fears that even if a Brexit deal could be reached, it would be rejected by parliament.

Sterling rallies on positive rhetoric were sold quickly amid fears that even if a Brexit deal could be reached, it would be rejected by parliament.

The dollar continued to punish European currencies on Monday and pushed to fresh 16-month highs as on-going political concerns unsettled the Euro and defensive support boosted the US currency.

Sterling rallies on positive rhetoric were sold quickly amid fears that even if a Brexit deal could be reached, it would be rejected by parliament.

Oil prices reversed an early rally attempt and slid to fresh 8-month lows with unease over increased supply continuing to undermine sentiment.

Equity markets declined, maintaining defensive yen demand, but gold failed to benefit and declined to fresh 1-month lows.

Hopes for progress in US-China trade talks triggered a limited recovery in risk conditions on Tuesday with the dollar retreating slightly.

Bank of England Deputy Governor Broadbent stated that there are signs of weaker fourth-quarter GDP growth, although he also commented that wage growth is materially higher and that the bank was seeing signs of domestic inflation pressure now. Gradual rate increases did not necessarily mean one hike per year while the Brexit outcome was crucial for the central bank.

Sterling remained under pressure in Europe amid evidence of further opposition to Prime Minister May’s Brexit plans. UK gilts also declined sharply which undermined currency support and GBP/USD dipped below 1.2850 with GBP/EUR peaking around 1.1479. EU Council President Tusk was reported to have stated that a deal needed to be in place by Wednesday night in order for there to be a special summit in November.

Early in US trading there were reported comments from EU Chief Negotiator Barnier that the Brexit Treaty was almost ready and that the main elements were ready to be presented to the UK Cabinet on Tuesday. Although the UK currency spiked higher with GBP/USD above 1.2900, selling quickly resumed after reports that the Cabinet would be likely to reject the EU offer.

GBP/USD dipped back to 1.2850 before correcting slightly as Prime Minister May stated that negotiations were in the end game. GBP/EUR settled near 1.1400 with both currencies remaining out of favour in global markets.

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