The pound struggled near a 20-month low against the dollar on Tuesday after British Prime Minister Theresa May postponed a crucial vote on her Brexit deal.
The pound struggled near a 20-month low against the dollar on Tuesday after British Prime Minister Theresa May postponed a crucial vote on her Brexit deal. Sterling was little changed at $1.2565 after slumping 1.3 percent the previous day, when the currency brushed $1.2507, its lowest since April 2017. May on Monday postponed a parliamentary vote, which was due to take place on Tuesday, on her Brexit deal to seek more concessions. The move stoked more uncertainty as Britain now faces Brexit without a deal, a last-minute agreement or another EU referendum.
The pound’s slide was a boon for the dollar, which rallied back from a 2-1/2-week low against a basket of currencies initially driven by a growing view the Federal Reserve could pause its rate hike cycle sooner than previously thought. The dollar index, a measure of the greenback’s strength versus a group of six major peers, advanced 0.75 percent on Monday and was back firmly above 97.00. At one stage in overnight trade it had fallen to 96.364, its lowest since Nov. 22.
“Falling U.S. yields will eventually nudge the dollar into a downtrend, but probably not at this moment,” said Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo. “There just isn’t enough demand for the yen, which is less of a safe haven, and the euro, with the political concerns in Europe. And there is of course the pound which is burdened with Brexit problems.”
The 10-year Treasury note yield has dropped to a three-month low this week, with dovish comments from Fed officials and soft U.S. data further sharpening views on an imminent pause in the tightening cycle. The dollar was a shade lower at 113.19 yen after advancing 0.5 percent overnight. The euro was flat at $1.1354 after shedding 0.2 percent on Monday.
The common currency did gain against the struggling pound, although concerns over violent protests in France against President Emmanuel Macron’s economic reform limited its gains. The Indian rupee was jolted after Reserve Bank of India Governor, Urjit Patel, resigned abruptly on Monday after a months-long tussle over policy with the government that has raised concerns about the bank’s independence.
Indian rupee forwards fell more than 1 percent on Monday, posting their biggest daily slump in more than five years. The Australian dollar was little changed at $0.7188 after slipping on Monday to a one-month low of $0.7170.