US dollar falls as Brexit trade deal approaches; sterling earnings

NEW YORK (Reuters) – The dollar slipped on Wednesday, having gained for three consecutive sessions, as risk appetite increased pending an imminent Brexit trade deal between the UK and the European Union.

The British Pound and Euro took off against the Greenback after Brexit headlines, as did currencies linked to a higher risk appetite like the Australian, Canadian and New Zealand dollars.

Britain and the European Union appeared close to closing a long elusive trade deal on Wednesday. A reporter for Britain’s Daily Mail said a deal has already been struck and speculation has circulated that UK Prime Minister Boris Johnson will make an announcement on Wednesday evening.

Yields on US Treasuries rose following the Brexit announcement, in line with those of Europe and the UK.

In afternoon trading, the dollar fell 0.1% to 90.39.

The dollar index has weakened by more than 6% this year as investors bet that the US Federal Reserve will maintain its ultra-accommodative monetary policy. Expectations of further declines in the dollar help support stock markets and emerging market currencies.

“We have a lower uncertainty premium than in March. The addition of the vaccines … basically established what we’ve known since the summer of a weaker dollar, ”said Mazen Issa, senior currency strategist at TD Securities in New York.

David Rosenberg, chief economist and strategist at Rosenberg Research, in a research note, said the technical measures suggested an increasing likelihood of an oversold dollar rebound.

“Longer term, the dollar remains negative – the trend, moving averages and mid-term momentum all remain in a downtrend,” he added.

US data, meanwhile, was mixed on Wednesday but had little impact on currencies.

Initial jobless claims fell unexpectedly last week, though they remained high, and a separate report showed consumer spending fell last month for the first time since April. Sales of new homes in the United States were also disappointing.

The euro rose 0.2% to $ 1.2180. The single currency earlier this month hit its highest level in more than two and a half years.

The British pound extended its gains against the dollar, topping $ 1.35. The pound, which had strengthened earlier when a freeze on the French border was lifted, traded for the last time up 0.9% to $ 1.3482. Against the euro, the pound jumped 0.8% to 90.33 pence.

Brexit headlines have eclipsed President Donald Trump’s threat to veto the US stimulus bill. Trump said the long-awaited stimulus package would have to be changed to increase the amount of stimulus checks – which could potentially disrupt the bill.

Elsewhere, the Australian dollar gained 0.7% against the dollar to US $ 0.7575, boosted in part by signs that a small outbreak of COVID-19 in Sydney would be contained. The New Zealand dollar also rose 0.7% to US $ 0.7091.