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Dollar Finds Footing as Sterling Slumps Ahead of Fresh Brexit Vote

3/29/2019, 11:28:07 AMBasics of Trading
Dollar Finds Footing as Sterling Slumps Ahead of Fresh Brexit Vote

The U.S. dollar jumped against its rivals Thursday, shrugging off data pointing to a slowing domestic economy, as a tumble in the pound offered support.

U.K. lawmakers are now set to vote on part of the prime minister's Brexit deal after yesterday's voting bonanza on a range of options for Brexit all failed to break the current impasse.

The U.S. dollar index, which measures the greenback against a trade-weighted basket of six major currencies, rose by 0.48% to 96.75.

U.S. gross domestic product increased at a 2.2% annual rate in the October-December period, the Commerce Department said Thursday. Economists had expected a 2.4% growth rate.

The greenback, however, managed to hold most of its gains thanks to a plunge in the pound as yesterday's Brexit votes failed win majority support, keeping the current Brexit deadline in place.

Prime Minister Theresa May will ask U.K. lawmakers on Friday to vote on one part of her Brexit deal, the Withdrawal Agreement, which sets out the terms of the U.K.'s departure from the EU during the transition period, the date the U.K. leaves the EU until the end of 2020.

GBP/USD fell 1.06% to $1.3050 and EUR/USD fell 0.16% to $1.1229.

The EU said it would only grant a Brexit delay until May 22 if the lawmakers back the deal. Failing that, Brexit will be delayed only until April 12.

May is betting that Brexit hardliners in her party could warm up to the idea of backing the deal in order to have a say in the next phase of Brexit negotiations. The prime minister said yesterday that she would step down if her deal gets passed.

The Withdrawal Agreement, however, is unlikely to gain enough support as the Democratic Unionist Party, which props up May's coalition government, has said it will vote against the Withdrawal Agreement as it included the Irish backstop.

If the Withdrawal Deal is rejected, other possible Brexit scenarios include a new referendum, revoking Article 50, a no-deal Brexit and a general election.

The Political Declaration, the other part of the Brexit deal, sets the terms of the U.K.'s future relationship with EU after Brexit, but will not be put forward for a vote.

USD/JPY rose 0.06% to Y110.58 as an uptick in Treasury yields helped turned sentiment positive on risk assets, denting demand for the safe-haven yen.