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Dollar Subdued Despite Sterling Giving Up Gains Ahead of Key Brexit Vote

1/15/2019, 11:27:35 AMMarket Analysis
Dollar Subdued Despite Sterling Giving Up Gains Ahead of Key Brexit Vote

The dollar edged lower Monday, even as the pound gave up most of its gains ahead of a vote on UK Prime Minister Theresa May's Brexit deal.

The U.S. dollar index, which measures the greenback against a trade-weighted basket of six major currencies, fell by 0.09% to 95.18.

May's Brexit deal is widely expected to be voted down in the UK parliament on Tuesday, but the pound continued to add to gains against the greenback amid falling expectations the UK will leave the European Union without a trade deal.

"Still, we believe the probability of a no-deal Brexit has sufficiently reduced," JPMorgan (NYSE:JPM) said. "Any of the following [outcomes]--extended stalemate, second referendum and even no Brexit--are now significantly more likely."

GBP/USD rose 0.19% to $1.2866, but remained below its session high of $1.2930. While EUR/USD rose 0.01% to $1.1469.

The dollar was also held back by a stronger yen on the back of safe-haven demand as weak data from China, fuelled concerns that the world's second largest economy is slowing.

USD/JPY fell 0.33% to Y108.20.

The dollar, which recorded a fourth-straight weekly slump last week, is expected to continue its decline, albeit at a moderate pace amid expectations that the Federal Reserve will adopt a slower pace of monetary policy tightening following dovish comments from various Fed members, including Chairman Jerome Powell.

Powell said last week the central bank will be "patient," on policy tightening, as it weighs the pace of global growth and domestic inflation.

"We are neither extreme dollar bears nor dollar bulls, but merely expect a moderate weakening of the U.S. currency," Commerzbank (DE:CBKG) said.

USD/CAD rose 0.04% to C$1.3268 as falling oil prices weighed on the loonie, supporting the pair.