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    European Session -Sterling rises on hopes of EU Summit deal to avoid Brexit

    Currency markets were relatively subdued today as there was nothing new in the headlines but this kept risk appetite in the markets, which flowed over from Wednesday. Data out of Europe showed that the Eurozone reported a slightly smaller current account surplus in December for a total of 25.5 billion euros.

    The Account of the ECB’s January policy meeting was released today showing that members of the Bank’s governing council were concerned about downside risks to the Eurozone economy and that rates would remain at current or lower levels for an extended period of time. There was an indication that there could be further rate cuts.

    The euro was range-bound versus the dollar in the first half of the European session before falling below $1.1100.

    Sterling was one of the best performing major currencies on the back of comments by Bank of England MPC member Jon Cunliffe who said that the markets’ pessimism on BoE rate hikes was not justified and they should not push back rate increases into 2019. Meanwhile, comments by European Commission President Jean-Claude Juncker also lent support to the British currency. Juncker was quite confident that a deal would be reached at the EU Summit this week that would help keep the UK in the EU.

    The pound traded higher against the dollar today to rise to a session high of 1.4393.

    Despite risk appetite, there was no notable weakness in the safe haven yen today. The USD/JPY pair traded in a small range just below the 114 yen level and did not move higher even after upbeat US jobless claims data. The dollar is being weighed down by Wednesday’s dovish Fed minutes and St. Louis Fed President James Bullard’s comments that it would be unwise to continue hiking rates amid falling inflation expectations.

    US initial jobless claims fell unexpectedly last week by 7,000 to a seasonally adjusted 262,000 claims. This was the lowest level since November 2015 and was contrary to forecasts that saw a rise to 275,000 claims.

    Other data out of the US showed the Philadelphia Fed manufacturing index printed a reading of -2.8 in February versus -3.0 expected and was an improvement from January’s reading of -3.5.

    Oil extended gains today to rise above $31.50 a barrel, after being supported by a deal announced between OPEC and Russia earlier this week. Iran has also welcomed the deal.

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