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Dollar Subdued as Sterling Shines on Brexit Divorce Deal Agreement

11/14/2018, 10:32:30 AMBasics of Trading
Dollar Subdued as Sterling Shines on Brexit Divorce Deal Agreement

The dollar eased against its rivals Tuesday, amid a surge in sterling after the European Union and Britain agreed a draft text of a Brexit withdrawal agreement, though doubts lingered about whether the U.K. parliament would back the deal.

The U.S. dollar index, which measures the greenback against a trade-weighted basket of six major currencies, fell by 0.20% to 97.19.

Prime Minister Theresa May will present a draft text of a Brexit withdrawal agreement to her senior ministers on Wednesday after both the UK and EU reached consensus on the Brexit divorce deal.

The divorce deal, however, is widely expected to meet opposition in the UK parliament.

"The problem is it has to come to parliament, and all we know about the views of different people across the political spectrum is a deal of this kind is not going to get through," Liberal Democrat leader Vince Cable told the BBC on Tuesday.

GBP/USD rose 0.79% to $1.2950, while EUR/USD rose 0.35% to $1.1258.

The dollar's recent run up toward 18-month highs has been met with skepticism, with some analysts warning that the gap between U.S. rates and that of the rest of the world, which has played a large part in propping up the greenback, will likely narrow next year.

This year, the dollar rose on expectations that the Federal Reserve would hike interest rates faster and by more than the its peers, but "recent trends in labor markets and wage growth outside the U.S. do not justify such benign monetary policy expectations," said Vasileios Gkionakis, global head of forex strategy at Banque Lombard Odier.

USD/JPY rose 0.05% to Y113.90 ahead of Japanese GDP data slated for late-Tuesday.

USD/CAD, meanwhile, rose 0.10% to C$1.3260 as an ongoing slump in oil prices kept a lid on gains in the oil-price-sensitive loonie.