The British pound softened versus the dollar and other rivals Wednesday as investors assess the likelihood U.K. Prime Minister Theresa May will be able to win approval of a draft Brexit deal in the face of heavy skepticism from members of her own government.
The pound GBPUSD, -0.1465% traded at $1.2941 versus the dollar, down 0.2% from its level late Tuesday. May was due to meet with her cabinet Wednesday. If May is able to win support for the proposal from government ministers, a summit of European Union leaders could be called for later this month. The biggest test would then be expected in the weeks leading up to Christmas, with a vote in parliament.
Read: Brexit deal faces hurdle as U.K.’s May must sell it to divided government
A vote in the House of Commons would be a major hurdle to a deal ahead of Britain’s scheduled exit from the European Union in March.
“The prospect for this vote and the noise from the backbenches should be where attention focuses beyond today’s news as it drives the risk” between prospects for an orderly exit, a disorderly exit, or even possibly a second referendum, said Adam Cole, chief currency strategist at RBC Capital Markets, in a note.
Meanwhile, the ICE U.S. Dollar Index DXY, +0.18% a measure of the U.S. currency against a basket of six major rivals, was up 0.3% at 97.305, reflecting, in part, a 0.4% slide by the euro to $1.1284. The U.S. unit was little changed versus the Japanese currency USDJPY, +0.16% fetching 113.86 yen.
Oil futures CLZ8, +1.01% were trading higher after a sharp Tuesday selloff that accelerated a crude rout that saw the commodity fall into bear market territory last week, just a little over a month after trading at a nearly four-year high.
See: 5 reasons oil prices are in a history-setting tailspin
The U.S. dollar was off 0.1% versus its oil-sensitive Canadian counterpart USDCAD, -0.0982% at $C$1.3224. The U.S. dollar is up 0.5% against the Canadian currency in November.
“So far the impact on the Canadian dollar has been limited but it will be very difficult for the USD/CAD to fall if oil prices continue to slide,” said Kathy Lien, managing director of FX strategy at BK Asset Mnagement, in a note.
Lien said the U.S. dollar is likely to remain strong overall through the end of the year thanks to a combination of solid data, rising interest rates, weakness in equity markets and continued trade spates between Washington and other major trade partners.
“The only risk is U.S. data. This week we have consumer prices and retail sales scheduled for release. Both of these reports have a direct influence on Fed policy and will determine the market’s confidence in Fed’s outlook,” Lien said.
See: MarketWatch Economic Calendar
The consumer-price index for October is due at 8:30 a.m. Eastern. Economists surveyed by MarketWatch forecast a 0.3% monthly rise, while core CPI, which strips out volatile food and energy prices, is forecast to rise 0.2%. October retail sales data is due on Wednesday and is forecast to show a 0.6% rise.
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