The euro hit a seven-week low against the pound and fell against the dollar.
The common currency was pushed lower by worries about the euro zone economy. Sterling was strong ahead of a no-confidence vote on British Prime Minister Theresa May’s government.
Investors sense the possibility of a no-deal Brexit is receding, given the concerns of lawmakers about the upheaval it could bring. Sterling hit a two-month high against the U.S. dollar on Monday and held near that level on Tuesday.
Prime Minister Theresa May faced the prospect of a historic defeat. If it passes this would be the last big hurdle before the UK leaves the EU in March. If it fails, possibly by more than 100 votes, May could draw up an alternative plan, without a deal.
A spokesman for May said she would respond quickly to the result of the vote. May says accepting her deal is the only way parliament can fulfil its promise to deliver the Brexit.
The biggest political and economic change for the country in decades will take place in barely two-and-a-half months.
START TRADINGForex – Commodities – D-Day for Brexit: May faces defeat, sterling falls
Investors are closely watching sterling with British Prime Minister widely expected to lose vote in parliament on her Brexit deal. Other analysts expect the pound will take a major beating if May loses the vote by a wide margin.
The euro fell after data showed Germany’s economy slowed in 2018, underscoring fears about a broader slump in Europe. An unexpected fall in German industrial output last week weakened the euro.
The German economy grew by 1.5 percent in 2018, the weakest rate in five years. Soon after the GDP data was released, the euro dropped to a five-day low of $1.1423.
The dollar edged up after days of losses caused by concern about a global slowdown. Expectations of a pause in Federal Reserve rate hikes this year also weighed. That has seen the dollar weaken against its peers by more than 1% since the start of the year.
The dollar index on Tuesday strengthened by 0.2 percent to 95.84.
The sterling traded down 0.2% against the dollar at $1.2848 ahead of the vote. However, it remained close to a 2-month high hit on Monday of $1.2930.
The Australian and the New Zealand dollar, both considered proxies for global risk appetite, were up 0.2% each. They have both recovered from Monday’s lows. Sentiment was aided by a fresh round of commitments from Chinese policymakers to stimulate their economy though fiscal steps.
Sources: Reuters, Investing, CNN money
PLEASE NOTE The information above is not investment advice.