The US dollar fell against its major peers, making gold an attractive investment for non-US currency holders, while the British pound soared after the Brexit deal changes. The market moods rose modestly as data on Monday showed retail sales in the US rose moderately in January, with building materials purchases and discretionary spending on the executive.
The dollar index, which measures the value of the greenback against the basket of six major currencies, fell by 0.2% to 97.056 points, prompting some investors to buy more risky assets. The index keeps correcting lower following last week’s new 2019 highs in the 97.70-97.75 band and is currently challenging the critical support at 97.00 the figure.
However, the dollar rose 0.2% against the Japanese yen, to 111.41 JPY against the background of improved risk appetite.
The British pound rose sharply on Tuesday after speculation that Prime Minister Theresa May was closer to obtaining approval for her Brexit deal after the European Commission agreed to make some changes before the vote in the British Parliament.
The British pound jumped to 1.3290 USD after May received binding guarantees for Brexit from the European Union, in a recent attempt to make the embarrassing British MPs vote on the UK divorce agreement with the EU.
After increasing some of its earlier profits, the British pound rose by half a percent in morning trading to 1.3214 USD. The British currency is still 2.1% above its lowest level of 1.2945 USD reached at some stage on Monday.
According to the analysts, the market has become more sensitive to positive news, not to negative news, as it has already evaluated many bad scenarios. British lawmakers are likely to vote for May’s agreement, which is expected later on Tuesday, just over two weeks before Britain’s departure from the European Union on March 29th.
If Theresa May loses the vote on her Brexit deal on Tuesday, she would propose to MPs to vote Wednesday whether they want to leave the EU without a deal. If this proposal is also rejected, a vote on postponing Brexit should be made.
At a joint press conference with European Commission President Jean-Claude Juncker late on Monday, Theresa May announced three documents aimed at resolving the most controversial part of the Brexit deal she negotiated in November – the Irish border. The Irish precautionary measure is an insurance policy designed to avoid control of the sensitive border between the British province of Northern Ireland and the EU Member State of the Republic of Ireland.
If they can remove the border and there may be some talks or at least compromise on both sides, it definitely looks like there is light at the end of the tunnel.
The pair EUR/USD has posted gains in the Tuesday session. Currently, the pair is trading at 1.1277 USD, up 0.28% on the day. On the release front, there are no German or Eurozone events. In the US, consumer inflation is expected to remain soft, with CPI and Core CPI projected at 0.2%. On Wednesday, the eurozone releases industrial production and the US publishes PPI and durable goods orders data.
On Tuesday morning, the rate was located between the 100-hour and the 200-hour simple moving averages at the 1.1272 mark.
In regards to the near-term future, most likely, the currency exchange rate will be trading at the 1.1250 level to stay between the monthly S1 at 1.1240 and the weekly pivot point at 1.1265.
However, the 100-hour SMA might help the European Single Currency to break the resistance of the 200-hour SMA during today’s US Consumer Price Index and Core Consumer Price Index data release at 12:30 GMT to surge to 1.1300.