Dollar Subdued as Sterling Shines on Brexit Divorce Deal Agreement

Galtero Lara
Noviembre 14, 2018

The Pound (GBP) is fighting back against the US Dollar (USD) today after Theresa May's Minister for the Cabinet Office David Lidington told the BBC that a Brexit deal was 'almost within touching distance'.

USA and European stocks fell sharply on Monday, with tech stocks in both regions getting hammered, while the United States dollar surged to its highest point in 16 months against a basket of currencies amid concern about European political risks.

Against the dollar, the euro edged 0.1 percent higher at $1.1229, above a June 2017 low of $1.1216. That helped support expectations for the Federal Reserve to continue raising interest rates, after the USA central bank last week offered a mostly upbeat assessment of the economy.

The pound fell nearly 1% against the dollar to US$ 1.286, whilst against the euro it was 0.2% lower at €1.142.

U.S. crude touched its lowest level in a year, and Brent also extended Monday's fall, which was triggered when U.S. President Donald Trump put pressure on OPEC to not cut supply to prop up prices.

The dollar has been preferred over the yen due to the diverging monetary policies of the Fed and the Bank of Japan, which is expected to retain its ultra-loose monetary policy settings for some time in the face stubbornly sluggish inflation.

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Analysts believe the yen will strengthen if global risk sentiment worsens, thanks to its safe-haven status. "We see dollar/yen downside in that scenario", said Nick Twidale, chief operating officer at Rakuten Securities.

With less than five months before Britain is due to leave the European Union on March 29, negotiations are still stuck over how to prevent a return to a hard border between British-ruled Northern Ireland and European Union member Ireland.

The euro EUR= gained 0.1 percent to trade at $1.1227 on Tuesday, after tumbling more than one percent versus the dollar on Monday.

Tuesday is the deadline for Italy to resubmit its budget proposals to the European Union after a showdown between Rome and Brussels over the government's spending plans that has rattled bond markets and weighed on the single currency.

The European Commission rejected Italy's 2019 budget last month, saying it flouted a previous commitment to lower the country's deficit.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc.

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