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Markets rattled as Iranian general killed by US strike

GBP - British Pound

Brexit will return to the headlines this week as parliament reconvenes tomorrow after its Christmas recess. The Tories have a commanding majority of 80 seats, its largest share since 1987 after triumphing in last month's general election. After a brief relief rally sterling has been steadily slipping back since the result as attention now turns to the future trading relationship between the UK and the EU. It looks all but certain that the UK's withdrawal agreement will be signed off by parliament later this month however Prime Minister, Boris Johnson's insistence on getting a trade deal done by the end of 2020 and no later has alarmed pound traders.

With one cliff edge scenario looking like it will be avoided it seems we could be heading to another one at the end of the year which has added downward pressure to the pound. GBP/USD briefly touched 1.35 in the aftermath of the election but is now back to 1.3070 as markets get jittery over this optimistic timetable proposed by BoJo. As some context, it took Canada seven years to agree a trade agreement so 11 months seems ambitious to say the least. GBP/EUR sits at 1.1715.

Key Movers

Markets have been shaken by the killing of Irans' top general by a US missile strike in Iraq last week. Qasem Soleimani was head of the the Quds Force which was responsible for overseas military operations on behalf of the Iranian state. He was seen as the second most powerful man in Iran after Supreme Leader Ayatollah Khamenei.

Friday's missile strike was authorised by US President Donald Trump and has ratcheted up tensions between the two countries. Soleimani was accused of organising and funding militia groups opposed to the US and coordinating attacks against US interests in the region. Iran has threatened revenge for the assassination and has pulled out of the agreement it signed limiting its development of nuclear material.

Markets were rattled by the move with USD/JPY dropping below 108 and risk assets shunned. Stocks around the world are lower for a second day in a row. The one "winner" from the situation is oil with Brent Crude up to $71pb as tensions over future output have seen its price rocket. Expect Iran to dominate news this week leading to the usual safe havens such as gold, JPY, CHF and USD remaining well bid. EUR/USD trades at 1.1175.

Expected Ranges

GBP/USD: 1.3030 - 1.3150 ▼

GBP/EUR: 1.1680 - 1.1760 ▼

GBP/AUD: 1.8790 - 1.8950 ▲

GBP/NZD: 1.9560 - 1.9730 ▲

GBP/CAD: 1.6950 - 1.7080 ▲