GBP

Sterling has managed to hold on to yesterday’s gains against both the dollar and euro in Asian trading, but the pounds rebound could be capped as Brexit fears resurface. Britain’s Chief negotiator Lord Frost has given the EU a month to come up with acceptable changes to the Brexit deal on Northern Ireland or the UK could unilaterally suspend it. Lord Frost said it should be clear by “early November” whether the UK and EU can agree changes to the Northern Ireland Protocol. If they fail to reach agreement, the UK believes the conditions have been met to invoke Article 16 to suspend the Protocol unilaterally, which is likely to trigger counter-measures from Brussels.

EUR

The euro has lost all of yesterday’s gains against the dollar and is once again testing recent support levels in early trading. The single currency benefitted from improved market sentiment yesterday, but has suffered in the early session as a fall in Asian stock markets created greenback demand. There was little reaction to Services PMI data for the eurozone released this morning, but the bloc’s producer price index released later this morning should gain more attention.

USD
The dollar edged back toward a one-year high versus major peers on Tuesday. The dollar index, which measures the currency against six rivals, rose 0.13% to 93.957, moving back toward Thursday’s peak at 94.504, its highest since late September 2020. The safe-haven greenback was supported by an equity sell-off that spread from Wall Street to Asia as fears resurfaced over China’s property sector after developer Fantasia Holdings Group Co failed to repay a bond payment. Comments from US President Joe Biden that the US could breach its $28.4 trillion debt limit within two weeks if Republicans do not cooperate on raising or suspending the debt ceiling also created safe haven demand for the dollar. US trade balance and PMI services surveys are todays most important data releases.

Economic Calendar
10.00 am EUR PPI index
01.30 pm US trade balance
03.00 pm US ISM services PMI