Dollar Rides Sterling's Slump Higher as Brexit Vote Looms
The dollar traded higher against a basket of major currencies Tuesday despite mostly negative U.S. data as a plunge in sterling ahead of a key vote on the UK's withdrawal agreement supported sentiment.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, gained 0.68% to 95.85.
Traders reined in their bullish bets on sterling ahead of the U.K. Parliament vote, which got underway at 2.00 pm ET, on British Prime Theresa May's Brexit deal, widely expected to be voted down.
Ahead of the vote, MUFG strategist Lee Hardman said investors will be focused on the magnitude of the defeat, with expectations in range of 100-200 votes.
GBP/USD fell 1.08% to $1.2725.
Weakness helped the dollar sidestep weak U.S. economic growth, including falling wholesale inflation, which did little to dent investor expectations that the Federal Reserve was set to take a more dovish stance on monetary policy tightening.
The Labor Department said on Tuesday its core producer price index for final demand fell 0.2% last month, pressuring the PPI for the 12 months through December, to 2.7%, below forecasts for a 2.9% rise.
The Empire State manufacturing index fell to a reading of 3.9 in January, missing economists' forecasts of 10.75, the New York Federal Reserve said Tuesday.
The euro, meanwhile, was pressured by dovish remarks from European Central Bank Mario Draghi, who continued to call for monetary policy easing amid concerns about slowing global growth.
EUR/USD fell 0.78% $1.1386.
USD/JPY rose 0.39% to Y108.59 as the safe-haven yen was shunned following a risk-on session in Asia overnight as China signalled fresh stimulus measures in the near-term.
USD/CAD fell 0.02% to C$1.3289 as rising oil prices underpinned the loonie, keeping a lid on gains in the pair.