By Rae Wee
SINGAPORE, Feb 28 (Reuters) - The pound held steady on
Tuesday, retaining gains overnight after Britain struck a new
trade deal with the European Union, which brightened the outlook
for the post-Brexit UK economy and signalled improved relations
between London and the bloc.
The dollar was mostly flat in early trade but was on track
to end higher for the month, ending a four-month losing streak.
Britain and the EU on Monday announced a new deal for
post-Brexit trading arrangements for Northern Ireland, known as
the Windsor Framework, which British Prime Minister Rishi Sunak
said would pave the way for a new chapter in London's
relationship with Brussels.
Sterling jumped on the back of the news to clock a
1% gain in the previous session, and rose to a high of $1.2069
on Tuesday.
The euro similarly got a lift and was last 0.05%
higher at $1.0614, after rising 0.6% on Monday.
The British parliament will now vote on the deal, with the
opposition Labour Party saying it will vote in favour.
The leader of Northern Ireland's Democratic Unionist Party
(DUP) said his party was working through the details.
"The mood music suggests that this thing will succeed ...
there probably is scope for some sort of residual sterling
strength here," said Ray Attrill, head of FX strategy at
National Australia Bank.
"The real thing is, is this a springboard for a stronger,
much improved removal of trade frictions more generally, between
the UK and the EU?"
The U.S. dollar index was flat in early trade but
headed for a 2.5% monthly gain, its first since last September,
as investors ramp up their expectations of how high the Federal
Reserve would need to raise rates to tame inflation.
A series of upbeat economic data from the United States
released in recent weeks has underscored the resilience of the
world's largest economy, strengthening the case for an extended
period of Federal Reserve hawkishness. Markets are now expecting
the Fed funds rate to peak just above 5.4% by September. "To be honest, I think we're sort of lurching from one major
data print to another," said Attrill. "The next move in the
dollar is really a function of how the February data starts to
play out in March."
Against the Japanese yen , the dollar steadied at
136.23. Incoming Bank of Japan (BOJ) Governor Kazuo Ueda has
thus far offered few clues on whether the BOJ could exit its
massive stimulus imminently, although he indicated that he had
ideas on such a move.
The kiwi slipped 0.02% to $0.6165, while the Aussie rose 0.13% to $0.6748.
Data released on Tuesday showed that Australia's current
account surplus rose sharply in the December quarter, while
separate data pointed to a strong rebound in Australian retail
sales in January, following a surprise drop in December.
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(Reporting by Rae Wee; Editing by Edmund Klamann)
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