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FX round-up: Pound dips on chatter about early elections, new Scottish referendum

Early gains in the US dollar on the back of a putative deal on trade between China and the US at the weekend had petered out by late in the session.
Particularly noteworthy were gains in the European single currency, despite the heavy selling seen in Italian sovereign debt markets, where the so-called 'risk premium' widened to 187 basis points, versus 165 last Friday.

Thus, by 2054 BST the US dollar spot index was drifting lower by 0.03% to 93.6130, with euro/dollar up by 0.12% to 1.1788.

Towards the end of the session and likely linked to the news around China, commodity currencies, including the Aussie and the Loonie were conspicuously higher as well, with the former tacking on 0.93% to 0.75802.

Sterling was lower against the Greenback however, losing 0.32% to 1.34266. It was also down against the single currency, erasing 0.45% to 1.1391.

According to Marshall Gittler at ACLS Global, the main drag on the pound was news that Nicola Sturgeon wanted to "restart a debate" on holding another independence referendum and that she would consider another vote in the Autumn.

In parallel, according to The Sunday Times, after hearing the Prime Minister's plans for Brexit during the previous week, and concerned by the prospect of an "insurmountable" deadlock on Brexit, a number of Tory MPs had begun preparing for another 'snap' general election for as soon as after the summer.

On top of that, LSL Property Services/Acadata reported that home prices in England & Wales declined for a third consecutive month in April, although the rate of fall did slow to 0.1% month-on-month.

Year-on-year, the rate of price gains was unchanged versus March at 1.0%, although excluding London and the South East prices were ahead by 3.0%.

The US dollar was also higher versus the Japanese yen, adding 0.22% to 111.029.

Late gains in crude oil futures, after US Secretary of State Mike Pompeo warned Iran to expect "historic" sanctions, may have contributed to the better tone, relatively speaking, in the euro.

Traders may also have been positioning themselves for the release of survey compiler IHS Markit's preliminary manufacturing and services sector purchasing managers' indices for May, on Wednesday.

So too, markets were expectant ahead of UK public sector net borrowing figures which were set for release in the next session, followed by a reading on April CPI on Wednesday and retail sales on Thursday.

Further afield, the Greenback was weaker against the Argentine peso, but surged by another 1.93% versus Turkey's lira to 4.5788.