Will the pipeline turn back on  

There was further uncertainty over gas supplies to the EU with the planned maintenance period for the Nord-Stream pipeline due to come to an end later this week. Gas prices edged lower on the day.

In this environment, there was renewed dollar selling and the Euro pushed towards 1.0200 before a retreat to 1.0160 towards the European close.

There were some reservations over selling the Euro ahead of Thursday’s ECB policy meeting with uncertainty over the interest rate decision. Risk appetite was less confident later in the US session which undermined potential Euro support as the dollar regained some ground. The Euro retreated to lows around 1.0120 before stabilising around 1.0150 in early Europe on Tuesday with some buying on dips.

The Pound managed to regain the 1.2000 level ahead of the European close with the Euro retreating towards 1.1795. Sterling was unable to hold above 1.2000 and retreated towards 1.1950 as risk conditions deteriorated. The Conservative Party leadership election had little impact, but tax policies will be in focus and comments from Bank of England Governor Bailey will be watched closely during the day.

The UK employment data was stronger than expected, but there was a slowdown in headline average earnings growth which may ease Bank of England concerns to some extent. Overall risk conditions remained important with Sterling edging higher to 1.1970 against the dollar with further evidence of short covering.