The British pound was on the front foot in early European hours on Tuesday, after both of the major parties moved closer to ensuring that a disruptive “no-deal” Brexit is avoided.
The pound rose 0.4% to $1.3150 (GBP/USD), after climbing to a session peak of $1.3161, a level last seen on Jan. 31. It also hit a nine-month high of 1.1590 against the euro earlier.
U.K. Prime Minister Theresa May will propose formally ruling out a no-deal Brexit at a crunch cabinet meeting later in the day, opening the door to a delay of weeks or months to the scheduled March 29 exit date.
That news follows a move by the opposition Labour Party last night to back a second referendum on Brexit if no parliamentary majority can be found for a withdrawal agreement that would ensure a smooth transition to life outside the European Union.
The news was a relief to investors who had feared Britain would crash out of the EU without a deal.
Elsewhere, the U.S. dollar was lower against most other major currencies, as market participants looked ahead to testimony from Federal Reserve Chairman Jerome Powell to a U.S. Senate committee later in the session.
It comes after the U.S. central bank adopted a more cautious stance on future interest rate hikes last month.
“The market will be looking for signs the Fed remains comfortable with the current state of policy,” said Steven Dooley, currency strategist at Western Union Business Solutions. “The markets will also want to hear details about the eventual end of the Fed’s balance sheet reduction program.”
The greenback was down 0.2% against the safe-haven Japanese yen at 110.85 (USD/JPY), pulling back from its highest since late December.
The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, was flat at 96.27.
Looking ahead, investors are likely to monitor data on U.S. housing starts and building permits for December due later in the day. A consumer confidence report for February is also on the agenda.