Fluctuations in Forex amid Brexit issue as sterling rises to 0.6 pct

The pound rallied on Tuesday as investors welcomed news that British Prime Minister Theresa May had secured legally binding assurances from the European Union ahead of a crucial parliamentary vote on her Brexit withdrawal deal.

Sterling added more than three cents from its Monday's lows at one point, as traders bet that May would eventually secure the support of sceptical colleagues for her deal, leaving Britain with a more orderly Brexit process. Against the euro the pound hit a new 22-month high.

Britain's parliament voted down May's deal by a record 230 votes in January, and sterling is likely to be sensitive to any signs the prime minister can chip away at those losses and convince colleagues to back her in a vote later on Tuesday. Britain's scheduled departure from the EU is March 29 and while fears of a no-deal Brexit have receded, investors still do not know how and when Britain will exit the trading bloc.

Sterling rose 0.6 per cent to $1.3232 in early London trading, below the $1.3290 level touched overnight. The pound was down as low as $1.2945 on Monday. Against the euro sterling also performed well, adding 0.4 per cent to 85.15 pence per euro after earlier touching 84.755 pence.

"Having lost the first vote by a margin of 230, approval of the Withdrawal Deal would be a huge surprise tonight and could send GBP/USD to $1.35. Elevated levels of short term volatility suggest that is possible, though perhaps not likely," ING analysts wrote to clients. Markets elsewhere were quiet as investors awaited the next cues about the state of the United States economy, with February inflation figures due at 1230 GMT.

Market sentiment received a modest boost after data on Monday showed U.S. retail sales rose moderately in January. The dollar index, which measures the greenback against a basket of rivals, was down 0.2 per cent at 97.013 as some investors bought riskier assets.

The Japanese yen also fell in a better mood, losing 0.1 per cent to 111.375 yen. The euro rose 0.2 per cent to $1.12655, recovering more ground after falling last week when the European Central Bank announced a delay to raising interest rates.

Sweden's crown is in focus ahead of February inflation data due at 0830 GMT. The crown has struggled in 2019 as investors push back expectations for monetary tightening.