Investing.com – The u.s. dollar depreciated against a basket of currencies on Tuesday, while the federal Reserve will be reluctant to raise rates this year because of the weakness of global growth, while the pound sterling was moving forward prior to the vote of the british Parliament on the agreement on the Brexit.
Fears of a strong slowdown in the world this year have increased in recent weeks as the tax cuts of the last year in the United States were going to fade and that the trade war with China would be increasing. This could at least slow down the rate at which the Fed tightens its monetary policy, or even stop it completely.
Futures markets, interest rates do not provide for any additional increase of the u.s. rate in 2019.
The dollar index, which measures the greenback’s strength against a basket of six major currencies, was at 95,21 to 03h06 EST (08h06 GMT) after a slight decline in 95,06. He had reached a minimum of three months of 94,79 last week.
“There is a strong aversion to the dollar, given expectations the Fed, but there is no replacement attractive,” said Sim Moh Siong, a strategist in the field of exchange at the Bank of Singapore. “Over the next 6 to 12 months, the dollar is expected to show a downward trend.”
The Fed chairman Jerome Powell, said last week that the u.s. central bank could be patient in terms of monetary policy, inflation remaining stable.
The pound briefly climbed above the level of 1.29 before a vote on the agreement between the government and the United Kingdom on the Brexit.
The GBP / USD has advanced 0.17% to 1,2881 after having climbed to 1,2916 earlier, while the EUR / GBP fell 0.13% to 0,8902.
The First british minister Theresa May must win a vote in parliament later on Tuesday to approve the agreement on the Brexit, or risk an exit chaotic Britain of the european Union. The numbers are not favourable for May and his chances of winning the vote are extremely slim. May should get 318 votes to win.
“It is interesting to note that speculators have bet that the result could delay the Brexit march 29, in the month of July (after the european Parliament elections of May) to allow for new elections or a second referendum,” says Philip Wee, a strategist in the field of foreign exchange at DBS, in a note.
But other analysts expect that the pound sterling takes a strong impulse if May loses the vote by a wide margin.
“Losing more than 100 votes or more is a major defeat, but some think that she could lose 200 votes. A major defeat will result in a sudden drop of the GBP, which could lead the GBP/USD 1.25 and EUR/GBP above 91 cents. “said Kathy lien, director general of the exchange-rate strategy at BK Asset Management, in a note.
The euro has held up against the u.s. currency, with the EUR / USD to 1,1469.
Moreover, the dollars of australia and new zealand, considered both as a substitute of the appetite for global risk, were strengthened after statements of the lows on Monday.
The feeling was strengthened by a new series of commitments made by chinese policymakers to stimulate their economies by fiscal and monetary measures.
The AUD / USD rose 0.31% to 0,7261, while the NZD / USD gained 0.32 per cent to trade at 0,6840.
The australian dollar has stabilized above the level of 0.72 us dollar and most analysts believe that it indicates that the chinese growth is likely to reach its lowest in the next few quarters. Given the strong slowdown in economic activity and the negative impact of the trade dispute between the United States and China on the chinese economy, analysts are hoping that the leaders of the two countries will reach a comprehensive trade agreement in the coming weeks.
Trade tensions between the two largest economies of the world have shaken the financial markets for the better part of the last year.
– Reuters contributed to this report.