Dollar Gains as Pound Drops Amid Brexit Discourse

On Tuesday, the greenback went up to nearly hit its highest level in three weeks, while the British pound fell as the Brexit discourse continues to cause worry for currency traders.

The GBP/USD pair fell 0.2% to 1.3068, while the U.S. dollar index went up 0.1% to 96.89.

U.K. lawmakers rejected all alternatives to Prime Minister Theresa May’s Brexit deal. These include negotiating a permanent customary union, U.K. joining the EFTA (European Free Trade Association) and EEA (European Economic Area), a public vote on the Brexit deal and a choice between no-deal Brexit or revoking Article 50, which means stopping Brexit if the European Union does not agree to an extension.

On the flip side, a stronger-than-expected uptick to 55.3 of the ISM manufacturing data for March showed signs of expansion in U.S. manufacturing, a relief from February’s 54.2 value, its lowest since November 2016.

The Bank of Montreal stated in a note, "ISM Manufacturing for March came in above expectations and employment remains below cycle peaks but comfortably back near prevailing levels in 2018, as March showed the biggest one-month increase in three years. This points to a potentially strong NFP on Friday,"

U.S. Treasuries yields had also surged overnight, greatly affected by the increase in manufacturing data as some investors decided to, once again, take hold of safe-haven bonds.

The 10-year Treasury yield pulled back from a 15-month low of 2.34 percent and stood at 2.49 percent.

“The dollar is benefiting from broader ‘risk on,’ with bonds sold and stocks being bought in light of the strong U.S. ISM data,” said the senior strategist at Barclays in Tokyo.

“Seasonal flows also appear to be helping the dollar, with the currency drawing demand from participants kicking off the new quarter,” he added

The dollar was also at 111.37 yen hitting a two-week high against the Japanese currency.

The USD/CNY pair was up 0.2% to 6.7198 after a previously reported positive Caixin/Markit PMI data.

Meanwhile, the AUD/USD pair dropped about 0.1%, as well as the NZD/USD pair, which fell 0.4% to 0.6775.

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