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Dollar Weakens Broadly, Sterling Rises Above 1.35

Dollar weakens broadly, sterling rises above 1.35 - The dollar slumped to the lowest levels of the day against a basket of the other major currencies on Thursday, boosting sterling to a nine-week high as investors remained focused on the progress of a U.S. tax reform bill.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.45% to 92.80 by 10:18 AM ET (15:18 GMT), and was on track for it largest monthly decline since July.

Sentiment on the dollar was hit following reports that U.S. President Donald Trump is looking to get rid of Rex Tillerson as State Secretary and replace him with CIA chief Mike Pompeo. The report added to concerns over turmoil in the Trump administration.

The dollar had showed little reaction earlier after data showing that U.S. consumer spending slowed in October, while a measure of underlying inflation rose for a second straight month.

The Commerce Department said consumer spending rose 0.3% last month after jumping 0.9% in September.

The Federal Reserve's preferred inflation measure, the personal consumption expenditures (PCE) price index excluding food and energy, rose 0.2% in October after a similar gain in September.

At the same time, another report showed that initial jobless claims fell for a second straight week as labor market conditions continued to tighten.

Investors remained focused on the U.S. tax bill as the measure moved toward a U.S. Senate floor vote later this week, amid ongoing concerns over how much it will expand the federal deficit.

Momentum towards a deal has been building this week after Senate Republicans voted to move the proposed bill to a debate on the floor. A final vote in the Senate could come as early as Thursday night.

The dollar erased gains against the yen, with USD/JPY last at 111.87, falling back towards Monday's ten-week low of 110.85.

The euro hit the highs of the day against the dollar, with EUR/USD rising 0.57% to 1.1916, within striking distance of Monday’s two-month high of 1.1961.

Earlier Thursday, data showed that euro zone inflation rose by a smaller than forecast 1.5% in November, highlighting weak price growth in the region and supporting the European Central Bank's plan to remove stimulus only gradually.

At the same time, another report showed that the unemployment rate in the euro zone dropped to 8.8% in November, the lowest since January 2009.

Sterling rose to its highest level since September 25, with GBP/USD up 0.89% to 1.3527 amid hopes that a deal on Brexit would be reached.

A report earlier on Thursday that Britain is close to a deal over the Northern Ireland border add to optimism after reports earlier in the week that Britain has reached a deal with the European Union over the size of its Brexit divorce bill.

The British government, however, said that nothing had been finalized in Brexit talks.

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