Dollar slips on a sterling rally sparked by Brexit hopes

The British pound shot higher against the U.S. dollar on Monday, boosted by hopes that a Brexit deal could be agreed to within six to eight weeks.

This timeline estimate came from European Union chief negotiator Michel Barnier at a conference in Slovenia, according to a Bloomberg report, and alleviated investors’ concerns that the U.K. could part ways from the continent in March 2019 without an agreement in place. Barnier also pointed out that a number of issues still needed resolution.

Sterling GBPUSD, +1.0464% surged in response, last buying $1.3017 compared with $1.2901 late Friday in New York. The euro-pound pair EURGBP, -0.5367%  was down 0.4% at £0.8913, according to FactSet.

Earlier, economic data showed that the British economy had grown 0.3% in July, beating the FactSet consensus forecast of 0.2%.

Market participants are also looking ahead to the Bank of England’s and European Central Bank’s respective September meetings scheduled for Thursday. The BOE is largely expected to hold rates steady after an August hike. The euro EURUSD, +0.3895%  bought $1.1599, up from $1.1553.

The ICE U.S. Dollar Index DXY, -0.27%  was weakened by the European strength, last down 0.2% at 95.134. On Friday, a jobs report detailing accelerating wage growth provided the buck with a boost, leaving the gauge to finish last week 0.2% higher — its first positive weekly performance since early August. This week, the Federal Reserve’s Beige Book report on Wednesday and Thursday’s consumer price inflation report will be in focus.

Trade issues were also on investors’ minds on Monday, after President Donald Trump on Friday said tariffs on another $267 billion on Chinese goods could be implemented in short order, on top of the already announced tariffs on $200 billion of goods that he has said would be deployed soon.

In Sweden, the krona USDSEK, +0.0066%  was slightly stronger versus the greenback, with one dollar buying 9.0337 krona, down from 9.0594 late Friday in New York. Sweden went to the polls over the weekend, and while the incumbent Social Democrats won the biggest share of the vote, they registered the worst result in recent history. As with many other Western nations, Sweden has seen an uprise of populist far-right politics, which, under the name Sweden Democrats, came in third.

Meanwhile in emerging markets, the dollar hit an all-time high against the Indian rupee USDINR, +0.7454% after economic data showed India’s current account balance widened to $15.8 billion in the second quarter of 2018, from $13 billion between January and March.

“The Reserve Bank of India intervened heavily in the FX market on Friday, mounting a formidable defense of the 72 rupee to the dollar mark in a reversal of its light-handed approach in the last few weeks,” wrote Qi Gao, currency strategist for Asian emerging markets at Scotiabank. India’s foreign reserves had shrunk to $400.1 billion from $401.29 billion on Aug. 31, Gao said.

One dollar last bought 72.4562 rupees, up 0.5% from Friday.

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