Forex Today: Risk aversion on the downside as Fed rate hikes and Brexit keep investors off-balance

In forex today, broader market action was largely subdued as markets continue to ponder the implications of Fed policy and the ongoing Brexit drama.

Fed's Williams: Fed to continue hiking rates along gradual path

Risk appetite remains constrained as market participants await potential changes to the US Federal Reserve's dot plot of upcoming rate hikes, which still holds steady at five, and with markets largely only pricing in another 3 rate hikes this cycle, a push by the FOMC to produce extra hikes over and above what is broadly expected could knock market sentiment back even further.

GBP under pressure from Brexit - HSBC

Brexit continues to remain a key issue impacting risk flows through the major market sessions, and this week poses a significant trial for the embattled UK Prime Minister Theresa May, who is still trying to desperately force through a Brexit compromise amidst a rising chorus for a no-confidence vote against the PM from within her own political party, and as the week unfolds traders can expect headlines to continue twisting sentiment towards the bearish side.

Key notes from the US session

UK: Theresa May under pressure? – Nordea Markets

EUR/USD extends rally to fresh 12-day high above 1.1450

US: Mixed economic releases – ABN AMRO

USD/JPY slumps to November lows near 112.40 as risk aversion dominates

Fed: Jerome Powell identifies headwinds for the economy in 2019 – ABN AMRO