Tuesday, 5 December 2017

Dollar steadies after Monday's bounce; sterling crumbles

LONDON (Reuters) - The dollar steadied on Tuesday after posting its biggest daily rise in a week in the previous session as caution set in before the U.S. tax bill becomes reality, with sterling leading early losers.

“With regards to the dollar, everything is already there in the price and we need to see further movement on the tax bill or strong data to push it higher,” said Manuel Oliveri, an FX strategist at Credit Agricole in London.

The Senate must now reconcile its version of the bill with legislation passed by the House of Representatives.

Against a basket of six major currencies, the dollar edged 0.1 percent higher at 93.278 after gaining about 0.3 percent the previous day, its biggest daily rise since Nov.

Sterling dipped more than half a percent GBP=D3 in early trades as disappointment over a Brexit deal prompted investors to cut their long bets. The British currency fell 0.8 percent to $1.3375, extending its decline from Asia.

Prime Minister Theresa May failed to clinch a deal on Monday to open talks on post-Brexit free trade with the European Union after a tentative deal with Dublin to keep EU rules in Northern Ireland angered her allies in Belfast.

Commerzbank strategists said Monday’s volatility in sterling showed how difficult the Brexit negotiations remain.

“As soon as the second round of the negotiations starts, which will be dealing with the trade agreement, things are going to heat up further as every single one of the 27 EU countries had the right to veto the agreement and can therefore block any progress,” they said.

The Australian dollar led early gainers after the The Australian dollar was 0.6 percent higher at $0.7639 AUD=D4 after data showed strong retail sales in October after months of lukewarm demand.

Reporting by Saikat Chatterjee

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