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Dollar Backtracks as Sterling Shines on Brexit-Deal Hopes

11/2/2018, 3:47:53 PMBasics of Trading
Dollar Backtracks as Sterling Shines on Brexit-Deal Hopes

The dollar slumped against its rivals Thursday after data showed U.S. manufacturing activity fell to a six-month low, while a surge in sterling also weighed.

The U.S. dollar index, which measures the greenback against a trade-weighted basket of six major currencies, fell by 0.89% to 96.04.

ISM manufacturing data for October showed a decline to a reading of 57.7, down from 58.8 last month and below expectations for a reading of 59. A reading above 50 in the ISM index indicates an expansion in manufacturing, which accounts for about 12% of the U.S. economy.

The dollar was also weighed down by a surge in sterling on reports that London is close to securing a financial services deal with the EU. The pound was further boosted by the Bank of England's hawkish tilt on Thursday as the central bank hinted at a faster pace of rate hikes should the UK and European reach a consensus on a withdrawal agreement.

GBP/USD 1.84% to $1.3001.

Citigroup (NYSE:C) brought forward its forecast for the next Bank of England bank rate interest, predicting a 25-basis-point rate raise to 1% in May 2019, rather than August 2019. The revision was triggered by changes in the bank of England's forecasts, coupled with fiscal loosening that remained yet to be reflected in the projections, said Citi economist Christian Schulz.

EUR/USD 0.88% to $1.1412, but analysts said the room for prolonged rally in the single currency would be limited by signs of flagging economic growth momentum in the eurozone and concerns about the euroskeptic political movement.

USD/CAD, meanwhile, fell 0.49% to C$1.3092 as slump in oil prices drew a muted reaction in the oil-price-sensitive loonie.

The safe-haven yen continued to tack on gains against the dollar, even as risk appetite in global stock markets improved.

USD/JPY fell 0.24% to Y112.67.