Pound Rises Ahead of Key Brexit Vote; Dollar Slides
The pound rallied in early European hours on Tuesday after British Prime Minister Theresa May secured last-minute changes from the European Union for her Brexit deal before a crucial vote in parliament later in the day.
The pound was up 0.6% at $1.3230 by 4:35AM ET (08:35 GMT), taking its gains over two days to more than 1.5%.
The euro slipped to its lowest against the pound since May 2017 at 0.8471, before recovering the losses somewhat. It was last at 0.8521, down 0.3%.
European Commission head Jean-Claude Juncker agreed to additional assurances in an updated Brexit deal with British Prime Minister Theresa May on Monday. Sterling, which had risen ahead of the talks between May and Juncker, extended gains in hopes the changes may be enough to sway rebellious British lawmakers who have threatened to vote down May's plan again on Tuesday. Dissenting MPs still haven't said whether they'll change their minds. A lower likelihood of crashing out of the EU with no Brexit deal could help to inject some bullish sentiment into equity markets by eliminating one of the three major concerns of global investors, alongside trade and slowing global growth, said Greg McKenna, strategist at McKenna Macro.
"Take Brexit off the table and I think some of the real money flows that appear to have turned up late last week are likely to be there again. So I think it helps change the backdrop a little bit," he said.
The euro, which has struggled recently due to dovish signals from the European Central Bank, found a measure of support against the dollar on the Brexit news.
The euro was up 0.2% on the day at $1.1272 (EUR/USD).
Elsewhere, the U.S. dollar stayed within familiar trading ranges as investors looked ahead to February inflation figures due at 8:30AM ET (12:30 GMT). Data on Monday showed U.S. retail sales rose moderately in January, lifted by an increase in purchases of building materials and discretionary spending.
The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, was down 0.25% at 96.93. However, the dollar tacked on 0.2% against the Japanese yen to 111.38 on the back of the improved appetite for risk.
Source: Investing.com & Reuters