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    European Session – Pound dips on Carney Brexit risks; Oil goes into reverse

    The British pound came under focus in Tuesday’s European session as Mark Carney testified in parliament on the EU referendum, while the euro failed to react to Eurozone data. Commodities meanwhile sharply reversed earlier gains.

    Bank of England Governor Mark Carney was speaking before the Treasury Committee in parliament today as he was being quizzed by lawmakers about the benefits of EU membership. Carney voiced support for British PM David Cameron’s renegotiated deal saying it addresses the important issues identified by the Bank. He warned that a “Brexit” could damage confidence and economic growth, as well as weaken the pound.

    Sterling started the session around 1.4250 dollars but dipped below the 1.42 handle in late European trading, weighed down by Carney’s warnings. The euro took advantage of the weaker pound to rally to 0.7789 pounds in late session.

    The single currency was more muted though against Eurozone data as it stuck to a tight range versus the dollar for most of the session. Better-than-expected German industrial production figures for January and a slight upward revision to fourth quarter Eurozone GDP had little impact. Quarter-on-quarter GDP growth was unchanged at 0.3% for the final three months of 2015, but annual growth was revised up from 1.5% to 1.6%. The euro briefly dipped below 1.10 dollars before surging to an intra-day high of 1.1055 dollars.

    It was also a quieter day for the dollar due to the absence of any major data releases. The greenback was struggling to hold above 113 yen as the Japanese currency benefited from increased risk aversion on Tuesday. The dollar fell to 112.75 yen in late European trading. The Swiss franc also gained, with the dollar sliding to 0.9933 francs in late session.

    Crude oil prices extended their gains at the start of the day on reports of a meeting between Latin American producers on Friday to discuss a common price position. Brent crude futures hit the highest since December, peaking at $41.48 a barrel, and WTI futures climbed above $38. However, a sharp sell-off saw oil give up Tuesday’s gains. Brent crude plunged to $39.95, while US futures fell to $36.77 in late European session.

    The Australian dollar moved in conjunction with commodity prices to fall back later in the day. The aussie had a rollercoaster day as it dipped after weak Chinese trade data before rebounding to 0.7469 versus the dollar. But the oil sell-off saw the aussie retreat to around 0.7439 in late session.

    Another casualty of the oil slide was the Canadian dollar. The greenback jumped to 1.34 versus the loonie, ignoring mixed Canadian housing data.

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