Brexit Wardrobe Weighs In Sterling Dollar Chooses Before Fed

Demand for the dollar was underpinned on Tuesday amid growing expectations the U.S. Federal Reserve could take a wait-and-see approach to further easing, while the British pound slid lower as fresh uncertainty over Brexit weighed.

The U.S. dollar index, a gauge of the greenback against a basket of six major currencies was up 0.17% at 97.68 by 05:12 AM ET (09:12 GMT), the highest since Oct. 17.

The U.S. central bank is expected to cut rates for a third time in a row when it concludes its two-day meeting on Wednesday.

Investors are watching for any indication that further cuts are likely, with futures pricing suggesting more easing is expected in 2020. If that is not foreshadowed, traders expect the dollar to rise.

“The forward guidance will be the thing,” said Westpac analyst Imre Speizer in Auckland.

“It still looks like a done deal that they will cut, but then the risk is that they might characterize that as just one more insurance move … the market will have to take out the pricing it’s got for future dates.”

Sterling slid to 1.2807 against the dollar, with Brexit hanging in the balance.

The European Union has agreed to delay Britain’s exit for up to three months, but the country is politically paralysed and overnight parliament rejected Prime Minister Boris Johnson‘s third attempt to schedule a Dec. 12 election.

Johnson is seeking an election in an attempt to break the deadlock in parliament and push through his Brexit deal.

The euro was softer against the dollar, down 0.17% to 1.1080.

Against the safe haven yen, the greenback was little changed at 108.91.

“Global risks remain but have shown signs of subsiding,” Philip Wee, FX strategist at Singapore’s DBS Bank said in a note.

“China-U.S. trade tensions have stopped escalating … the Fed has reasons to sound less dovish on a ‘half-full’ narrative for the U.S. economy.”

U.S. President Donald Trump had said a trade agreement looked to be ahead of schedule on Monday, without detailing the timing. The United States also said it was studying whether to extend tariff suspensions due to expire in December.forex.com

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