Currencies: Dollar turns positive; British pound climbs as likelihood of Brexit delay rises

The U.S. dollar flipped into positive territory against many of its rivals in the aftermath of December consumer-price inflation figures. One exception was the British pound, which defended its strength after U.K. newspaper The Evening Standard reported that a delay to the March 29 Brexit was becoming increasingly likely.

The buck started the session on the back foot, but managed to climb after December consumer-price inflation data was released even though it showed CPI to drop for the first time in nine months on the back of lower gas prices. Still, the ICE U.S. Dollar Index DXY, +0.16%  moved up 0.2% to 95.723.

See: Big Mac Index shows the dollar is at its strongest in 30 years

“I don’t think the dollar move was necessarily linked to the CPI data,” said Minh Trang, senior FX trader at Silicon Valley Bank.

Simultaneously to the greenback creeping higher, the euro EURUSD, -0.2261%  gave up its gains, slipping to $1.1469, compared with $1.1500 late Thursday in New York. Earlier in the week, the shared eurozone currency reached a three-month high.

“The euro certainly feels like it found a floor,” Trang said.

But clear drivers in form of buoyant economic data, a resolution to Brexit or monetary policy tightening are only expected later in the year.

In other U.S. news, Chinese Vice Premier Liu He will be in Washington at the end of January to meet with trade representatives.

Also check out: BOE’s Carney sees the U.S. dollar eventually losing its reserve-currency status

In the U.K., the possibility of a delay to the March 29 Brexit day is becoming more real. While the idea of a delay was refuted by Prime Minister Theresa May’s government earlier this week, Friday’s report said that May’s cabinet ministers saw the likelihood of it rising. The pound GBPUSD, +0.3922%  climbed to a session high of $1.2862 in response. It last fetched $1.2793, versus $1.2749 late Thursday in New York.

Sterling also strengthened against the euro EURGBP, -0.5987% with one euro last buying £0.8962, down 0.6%.

“Sterling’s aggressive appreciation following the report continues to highlight how the currency remains extremely sensitive and highly reactive to Brexit headlines,” wrote Lukman Otunuga, research analyst at FXTM.

The U.K. Parliament is slated to vote on May’s Brexit deal on Jan. 15, but market participants are skeptical whether she will be able to shore up enough votes. The deal had initially been headed for a December vote, but was postponed under the assumption May would otherwise be defeated.

On Thursday, Labor Party leader Jeremy Corbyn said the Brexit deadlock demanded fresh elections.

Also read: Brexit Brief: Business lobby warns of risks to thousands of U.K. jobs

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