· The U.S. dollar rose against the euro on Tuesday after data showed Germany’s economy slowed in 2018, and sterling slipped ahead of a parliamentary vote on the United Kingdom’s withdrawal from the European Union.
Growth in Europe’s largest economy slowed to 1.5 percent in 2018, the German government reported on Tuesday. That was the slowest rate of GDP growth in five years. Investors are also worried about slower growth around the world due to trade disputes driven by U.S. President Donald Trump’s policies.
Against the dollar, the euro dropped to a five-day low of $1.141 after the data was released.
The dollar index, which measures the greenback against a basket of its peers, last traded at 96.039.
The British pound rallied back from a sharp drop on Tuesday as traders digested a UK parliamentary vote that shot down a proposed Brexit deal from Prime Minister Theresa May.
As of 3:21 p.m. ET, the pound was up marginally at $1.2868 against the dollar. The currency had fallen more than 1 percent immediately after the vote. However, the pound regained its losses as traders bet the possibility of a hard Brexit were decreasing.
· Defeat for the U.K. government over its proposed Brexit deal has thrown the country into yet more political uncertainty.
U.K. Prime Minister Theresa May had placed a motion before lawmakers in the lower house of Parliament, asking them to rubber stamp her withdrawal agreement with the European Union.
The bill was rejected by 432 votes to 202. The 230 vote defeat is thought to be the largest in U.K. political history.
Theresa May lost big on her Brexit deal vote — here's what could happen now
1. Renegotiation
The size of the defeat now makes it questionable whether the prime minister can tweak the deal to change the minds of lawmakers. But May and her team might believe there are a significant number of MPs (Members of Parliament) close to switching sides, so watch to see if she dashes to Brussels in an attempt to wrestle further concessions from Europe.
2. General Election
The leader of the opposition Labour party, Jeremy Corbyn, has said he will put forward a motion of no-confidence in Theresa May's government on Wednesday. It's expected that a result of that vote will be known by 7.00 p.m. London time on Wednesday.
If that isn't possible, then a General Election is likely. The EU has said that a change in U.K. leadership would not change its stance.
3. Second referendum
Momentum has grown for a second referendum which proponents argue would gauge the public's appetite for Brexit, now that people have a clearer idea of what it means. Critics of a second vote have said it would ignore and insult the democratic process of the original vote.
4. Article 50 extension
An extension would have to be approved by the EU's other 27 members. It's unclear in what circumstances they would approve that and by how long they would agree to extend it.
5. No Brexit
Any move toward a second referendum or an extension of Article 50 would increase speculation that the U.K. will not actually leave the EU. On Monday, May delivered a speech that claimed such an outcome would result in "catastrophic harm" to people's faith in the British political system.
6. Brexit with no deal
Several analyses have warned of the extreme economic damage that leaving Europe without any deal could bring. A Bank of England report in late 2018 said if such a scenario were agreed, then unemployment could rise to 7.5 percent, house prices could fall 30 percent, sterling might crash, and the economy could shrink by around 8 percent over the course of a year.
· European Council President Donald Tusk suggested that U.K. lawmakers revoke the country’s decision to leave the EU, saying it’s the only positive solution left on the table.
· The U.K. opposition leader has tabled a motion of no-confidence in the government following the defeat of Prime Minister Theresa May’s Brexit deal.
Speaking after the announcement of the results, Jeremy Corbyn, the leader of the Labour party, said the result was a “catastrophic defeat” for the government.
Corbyn further announced that the no-confidence motion will be debated in the House of Commons on Wednesday with a vote reportedly due at around 7 p.m. local time.
· China's finance ministry said on Tuesday that it will step up fiscal expenditure this year and implement larger tax and fee cuts.
At the same time, the government said it will reduce its general expenditures by more than 5 percent, the finance ministry said in a statement provided before a news conference.
The statement didn't specify areas where expenditure would be reduced.
The central bank, in a separate statement on Tuesday, said it will maintain prudent monetary policy, keeping it neither too tight nor too loose, and strengthen the counter-cyclical adjustments.
Monetary policy will be made more forward-looking, flexible and targeted, said the bank.
· Oil prices rose about 3 percent on Tuesday, along with world stock markets, supported by China's plan to introduce policies to stabilize a slowing economy, reversing the previous session's losses due to grim data in the world's second-largest economy.
U.S. West Texas Intermediate ended Tuesday's session up $1.60, or 3.2 percent, to $52.11. Brent crude oil was up $1.39, or 2.4 percent, at $60.38 per barrel around 2:30 p.m. ET.
Reference: CNBC
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