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Dollar Rides Sterling Slump Higher as May Cans Brexit Deal Vote

12/11/2018, 10:40:01 AMBasics of Trading
Dollar Rides Sterling Slump Higher as May Cans Brexit Deal Vote

The dollar rose against its rivals Tuesday, helped by a plunge in the pound to 21-month lows after UK Prime Minister Theresa May called off a vote on a Brexit deal expected Tuesday, raising further uncertainty about the country's exit from the European Union.

The U.S. dollar index, which measures the greenback against a trade-weighted basket of six major currencies, rose by 0.70% to 97.15.

May called off a parliamentary vote for the Brexit deal, deferring it until a later date, fearing that the deal would have not gained the required votes to pass through parliament amid disagreements among UK lawmakers concerning the Irish border, or backstop, issue.

May attempted to convince parliament that she would seek additional legal assurances from the EU that the backstop will only be temporary during her negotiations in Brussels over the next few days. But EU lawmakers have shown little willingness to ease their stance, reaffirming the Brexit deal was not up for renegotiation.

"We will not renegotiate the deal, including the backstop, but we are ready to discuss how to facilitate UK ratification. As time is running out, we will also discuss our preparedness for a no-deal scenario," EU Commissioner Donald Tusk said.

GBP/USD fell 1.59% to $1.2549, while EUR/USD fell 0.22% to $1.1354.

The dollar rose to session highs against safe-haven yen, meanwhile, on improved risk sentiment.

USD/JPY rose 0.43% to Y113.19

The dollar has been under pressure in recent trading sessions on expectations the Federal Reserve may adopt a less aggressive stance on monetary policy tightening next year amid trade uncertainty and slowing global growth.

"A decision to pause (on rate hikes) in March would also be consistent with the likelihood that tariff-related uncertainty will look particularly high around the end of the 90-day grace period on March 1," Goldman Sachs said in a note to clients.

USD/CAD, meanwhile, rose 0.94% to C$1.3392 as the loonie came under pressure from falling oil prices.