Investing.com - The dollar fell sharply against a basket of major currencies on Tuesday weighed by geopolitical events while sterling rose to a two-and-half month high, after UK Prime Minister Theresa May announced plans to call an early election.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, fell by 0.53% to 99.67 by 18:15 EDT.
Geopolitical events dominated moves in dollar related currency pairs, after the UK Prime Minister Theresa May announced that she is calling for an early general election in the U.K. with a vote being held on June 8.
Market participants were taken aback by the decision from UK Prime Minister May to call a snap election, after she previously said that the next general election would be held as scheduled in 2020.
Elsewhere, weaker than expected economic data weighed on the dollar, after U.S. home building fell by more than expected in March.
Housing starts declined 6.8% to a seasonally adjusted annual rate of 1.22 million units, the Commerce Department said on Tuesday.
Meanwhile, market participants are expected to monitor the progress of a meeting between US Treasury Secretary Mnuchin and Japan Finance Minister Aso on Thursday.
The meeting comes fresh of the heels of comments from U.S. President Donald Trump, after he told the Wall Street Journal that the dollar was “getting too strong”.
GBP/USD soared to a two-and-a-half month high at $1.2768, up 1.6%, as investors believed that Prime Minister May can increase the Conservative Party parliamentary majority in the general election, which would give May more freedom to push through her Brexit agenda.
Safe-haven demand remained strong, after investors piled into the yen, with USD/JPY trading at 108.44, down 0.42%, by 13:03 EDT
Despite uncertainty surrounding the outcome of the French Presidential elections, which is set to be held on April 23, EUR/USD rose by 0.62% to $1.0709.
USD/CAD traded at $1.3396, up 0.59%.