By Yasin Ebrahim
Invesing.com – The dollar climbed Monday, on data showing manufacturing activity expanded in January for the first time in six months, while a slump in the pound also boosted the greenback amid fears the U.K and European Union could clash on trade.
The U.S. dollar index, which measures the greenback against a trade-weighted basket of six major currencies, rose by 0.42% to 97.62.
The ISM manufacturing index for January showed an uptick to 50.9, beating expectations of 48.5. A reading above 50 in the ISM index indicates an expansion in manufacturing, which accounts for about 12% of the U.S. economy.
Still, many expect that the turnaround in manufacturing is unlikely to be repeated.
"Looking ahead, we expect that the ISM Manufacturing Index will decelerate next month due to ... seasonal issues ... and the disruptions related to the coronavirus outbreak," Stifel said in a note.
The weaker data did little to knock the dollar's advance thanks to a sharp decline in the pound.
GBP/USD fell 1.56% to $1.2994 as the U.K. and EU expressed opposing views on a future relationship, raising fears Britain risks leaving the economic bloc at the end of the transition period, Dec. 31, without a deal.
EU chief negotiator Michel Barnier said the EU was prepared to make a wide-ranging free trade agreement but stressed it would be conditional on the U.K. retaining various EU rules to ensure a "level playing field."
But U.K. Prime Minister Boris Johnson said he was unwilling to adopt EU standards as means to secure a free trade deal.
EUR/USD fell 0.27% to $1.063, shrugging off data showing stronger-than-expected manufacturing activity in the eurozone.
The bid in safe havens faded somewhat, inflicting damage on the yen and Swiss franc, despite ongoing concerns about the impact of the coronavirus outbreak on global growth
USD/JPY rose 0.24% to Y108.65 and USD/CHF added 0.32% to 0.9661.