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The dollar index, a gauge of its value versus six major peers traded at 97.03 on Wednesday, down 0.28 percent. The index hit a 16-month high of 97.69 on Monday.

The sell-off in the dollar has been due to the improved risk sentiment around a potential Brexit deal and not because of any deterioration in the fundamentals of the U.S. economy. The euro and sterling constitute around 70percent of the weight in the dollar index.

The British pound traded at $1.3006 on Wednesday, gaining 0.25 percent as traders reduced bearish bets after Britain and the European Union agreed a preliminary text that would allow the United Kingdom to leave the EU with a deal that avoids a chaotic “hard Brexit” departure.

The challenge for British Prime Minister Theresa May is now to sell this deal to the parliament, where hardline Brexit supporters accused her of surrendering to the EU. The British cabinet will meet at 1400 GMT on Wednesday to consider the draft withdrawal agreement.

Riding on the positive sentiment around a potential smooth and orderly Brexit deal, the euro gained 0.14 percent to trade at $1.1305 on Wednesday. The euro’s gain was limited by concerns about Italy’s budget proposals and downbeat German investor confidence data, traders said.

·       The euro and sterling climbed higher on Wednesday as investor confidence rose on news Britain had struck a draft divorce deal with the European Union after more than a year of talks.

·       The U.S. government should create a fund to counter Chinese infrastructure financing deals in the developing world that export China’s “model of authoritarian governance,” according to a bipartisan commission report to the U.S. Congress released on Wednesday.

The report from the U.S. China Economic and Security Review Commission has been complied almost every year since 2002 by a group tasked with monitoring the national security implications of U.S.-China trade relations. This year’s edition said that China’s efforts to finance bridges and even digital networks in Asia, Africa, the Middle East and Europe have given the Chinese government an excuse to maintain a military presence there.

·       The incoming Democratic chairman of the U.S. House of Representatives Judiciary Committee intends to investigate President Donald Trump’s impact on the integrity of the Justice Department and the FBI, according to a letter sent to top federal law enforcement officials on Tuesday.

“I write with growing concern over President Trump’s repeated attacks on the integrity of the Department of Justice and the FBI,” Nadler told Whitaker and Wray in the Tuesday letter that was made public.

“The president’s behavior appears to be motivated by an urge to shield himself, his family, and his business interests from the ongoing work of the department and the bureau.”

·       The European Central Bank will take a ‘long time’ to fully end stimulus and normalize policy, Bundesbank President Jens Weidmann, a frequent critic of ultra-loose policy, said on Wednesday.

“Concerning central bank interest rates, we have said that we’ll keep them on hold through next summer, then envisage a rate rise,” Weidmann said in Berlin. “So you see, it will take a long time before monetary policy returns back to a normal.”

·       Brexit is making headlines again and the uncertainty on whether or not negotiations between UK and EU officials will lead to an agreement has kept the European economy on edge.

Speaking at the Deutsche Bundesbank reception of Euro Finance Week on Tuesday, ECB vice president Luis de Guindos said that the uncertainty surrounding Brexit continues to be a “difficult matter.”

“[W]e do not know what kind of Brexit we will eventually have,” he said.

·       Prime Minister Theresa May will try to convince senior ministers on Wednesday to accept a draft European Union divorce deal that opponents said would imperil her own government and threaten the unity of the United Kingdom.

·       The German economy contracted for the first time since 2015 in the third quarter as global trade disputes swung the traditional export growth engine of Europe’s largest economy into reverse.

Gross domestic product (GDP) in Europe’s biggest economy contracted by 0.2 percent quarter-on-quarter, the Federal Statistics Office said on Wednesday. That compared with a Reuters forecast for a contraction of 0.1percent.

Compared with the same quarter of the previous year, the economy grew by 1.1 percent from July to September, calendar-adjusted data showed. Analysts polled by Reuters had expected 1.3 percent.

·       The European Union’s trade commissioner, Cecilia Malmstrom, said on Tuesday she assumes the United States will not slap auto tariffs on the EU while the two sides are negotiating on trade, even as the Trump administration considers options to shield the U.S. auto industry from imports.

·       Italy re-submitted its draft budget for next year to the European Commission with the same growth and deficit assumptions as the draft rejected last month for breaking European Union rules, but with falling debt, the new draft showed.

EU fiscal rules require highly indebted governments like Italy to cut deficit and debt every year.

Rome stuck to its growth assumptions for 2019, 2020 ad 2021, which the Commission and the IMF see as unrealistically high, and to the headline deficit target for next year of 2.4 percent, up from 1.8 percent Rome expects this year.

But it forecast its public debt would fall, thanks to revenues from privatisation from which Rome wants to get 1 percent of GDP.

·       The European Union would make a mistake if it fined Italy for breaching the bloc’s fiscal rules with its 2019 budget, the country’s deputy prime minister said on Wednesday.

·       Japan’s economy shrank more than expected in the third quarter, hit by natural disasters and a decline in exports, a worrying sign that trade protectionism is starting to take its toll on overseas demand.

The annualized 1.2 percent contraction in July-September was bigger than a median estimate for a 1.0 percent drop and followed a robust 3.0 percent expansion in the previous quarter, government data showed on Wednesday.

·       China delivered a mixed economic report card for October on Wednesday as softening retail sales pointed to a consumption slowdown, even as a pick-up in industrial output and investment suggested support measures may be starting to take hold.

Retail sales rose 8.6 percent in October from a year earlier, the National Bureau of Statistics (NBS) said, the slowest since May. Analysts had expected only a marginal dip from 9.2 percent in September.

One of the few bright spots was industrial output, which rose 5.9 percent. It had been expected to ease slightly from September’s 5.8 percent.

But analysts warned the rebound may be short-lived, saying exports could fall sharply if the U.S. proceeds with a sharp hike in duties on Chinese goods from January. Surveys show factory export orders have been shrinking for months.

·       Oil struggled to find its footing on Wednesday after plunging 7 percent the previous session, with surging supply and the specter of faltering demand scaring off investors.

U.S. West Texas Intermediate (WTI) crude oil futures were at $55.52 per barrel at 0732 GMT, down 17 cents, or 0.3 percent, from their last settlement.

International benchmark Brent crude oil futures LCOc1 were down 9 cents at $65.38 per barrel.

Crude oil has lost over a quarter of its value since early October in what has become one of the biggest declines since a price collapse in 2014.