Safe haven currencies were largely higher on Wednesday following a war of words between Pyongyang and Washington on Tuesday evening.
With lack of macroeconomic data since the Bank of England meeting last Thursday, Brexit news has dominated local headlines in the UK. As such, the pound struggled to recover losses against the dollar and it remained flat under the $1.30 mark.
At 11:24 GMT, GBP/USD was 1.2997, just 0.05% up from the previous session close.
The Bank of England Deputy Governor Sam Woods released an assessment of the Brexit process following a survey of banks and businesses in the UK, and how they would be affected by exiting the European Union.
Woods found that accepting a transition deal would be a cheaper and smoother alternative to the 'hard' Brexit that many Conservative MPs have advocated.
The uncertainty surrounding the government’s position on Brexit has weighed heavily on business investment, and this was made apparent when the Bank of England slashed growth forecasts for the UK in its meeting last Thursday.
Sterling had been enjoying highs against the dollar, however events this past week have brought it lower showing its weak position amid economic and political uncertainty. This past week it has been driven to ten-month lows against the euro, and two-week lows against the dollar.
The US dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was steady at 93.49.
Geopolitical tensions have rocked markets on Wednesday. North Korea’s Kim Jong Un met President Trump’s “fire and fury” rhetoric with claims he could decimate the US Pacific territory Guam.
Meanwhile in Europe, markets were on edge following reports that a BMW vehicle drove into a group of soldiers in Paris on Wednesday. It has been described as deliberate and authorities are on the hunt for the perpetrator.
Sterling made gains against the euro, yet the single currency remained strong above 0.9000. EUR/GBP was down 0.19% at 0.9030.
The Swiss Franc, a safe haven currency, had been performing poorly of late due to the Swiss National Bank’s ultra loose stance on monetary policy. However in the wake of escalating tensions in the Korean peninsula, the Swissie has made gains across the board. GBP/CHF was down almost 1 percentage point at 1.2533.
Against the Japanese yen, sterling was half a percentage point lower. GBP/JPY was 142.62.
The pound performed better against commodity currencies, making small gains across the board. GBP/CAD was up 0.14% at 1.6482. GBP/AUD was up 0.35% at 1.6471.
Ahead of the Reserve Bank of New Zealand monetary policy decision on Wednesday evening, GBP/NZD was 1.7740, an increase of just 0.07%.
The world will be on alert to see how the latest Korean saga unfolds.
US inflation data will be released on Friday, and will be watched closely following the positive labour market numbers last Friday and the JOLTS job openings on Tuesday.
Manufacturing production data from the UK will be watched closely by investors on Thursday.