Investing.com - The dollar dipped against a currency basket on Wednesday, while the pound slipped back below the 1.30 level ahead of a key UK cabinet meeting to debate the draft agreement on Brexit hammered out after more than a year of talks.
The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, slid 0.14% to 97.01 by 03:50 AM ET (08:50 AM GMT). The index hit a 16-month high of 97.53 on Monday.
The pound edged lower, with GBP/USD changing hands at 1.2974, after hitting a high of 1.3046 on Tuesday.
Sterling had strengthened after negotiators in Brussels finally agreed draft terms for Britain’s departure from the European Union.
But the pound slipped lower amid uncertainty over whether British Prime Minister Theresa May will be able to convince her deeply divided cabinet to back the deal at a meeting later in the day.
If the cabinet approves the plan, the EU expects to hold a special Brexit summit on Nov. 25. May can then present the deal to parliament, most likely in mid-December.
The euro was little changed against the pound, with EUR/GBP at 0.8702, holding above the five month lows of 0.8655 reached on Tuesday.
The single currency was flat against the dollar, with EUR/USD at 1.1282, off an overnight high of 1.1283.
In the euro zone, data showed that Germany’s economy contracted for the first time since the first quarter of 2015 in the third quarter, adding to fears over the impact of global trade wars on the outlook for global growth.
The data came after a report overnight showing that Japan’s economy contracted in the three months to September.
Investors were looking ahead to preliminary data on third quarter growth in the wider euro zone later in the day.
The euro was also on the back foot after Italy defied the European Commission by sticking to plans for a high deficit in next years draft budget.
Brussels, worried by the impact of high spending on Italy's high levels of debt, had told Rome to revise the budget or face possible fines.
The dollar was steady against the yen, with USD/JPY at 113.84.