Dollar Edges Higher as Brexit Votes Leave Sterling in Limbo
The dollar was slightly stronger in early trading in Europe on Thursday as signs of global economic weakness push a retreat from riskier assets.
Meanwhile, the British pound is steady after a flurry of voting on Brexit that – yet again – created no clarity about the U.K.’s ultimate destination.
The U.K.’s House of Commons voted against all eight of the alternatives to Prime Minister Theresa May’s divorce deal last night in London. The motion that came closest to passing – which advocated a second referendum – failed primarily because opposition Labour lawmakers defied their own leadership’s instructions to vote for it, fearful of a backlash from constituents who voted to leave three years ago.
May’s deal still doesn’t have enough support to command a majority, even though she succeeded in buying off some prominent dissenters in her own party by promising to step down as leader if they backed it.
As such, the default outcome is still that the U.K. leaves the EU on April 12th without a deal. Sterling has refused to panic, however, and at 4:00 AM ET (0800 GMT) was back at $1.3154 against the dollar and 1.1702 against the euro, having dipped briefly after the vote.
The euro is flat against the dollar at $1.1250, testing a two-week low. The dollar index, which measures the greenback against a basket of six major currencies, was at 96.535, up around 0.3% from late trading in the U.S. on Wednesday.
Elsewhere, the more vulnerable emerging market currencies are showing increasing signs of strain after a wave of weak economic data from key markets was followed by anxious-sounding comments from central bank officials. The dollar is up over 3% against the Turkish lira in early trading, as the central bank’s efforts to rein in offshore short selling merely succeed in attracting more speculative attacks. The central bank is under pressure to keep the currency stable ahead of municipal elections this weekend.
The dollar is also rising against the South African rand and hit a six-month high against theBrazilian real and a new record high against the Argentinian peso on Wednesday.