Brexit progress drives USD down

MOEX:USDJPY   U.S. Dollar / Japanese Yen
The greenback remains on the defensive for a third day in a row on Thursday. The key reason behind its local weakness is a meaningful progress on Brexit as Theresa May got cabinet approval for her draft agreement which fuelled sterling and euro rally. By the way, the buck is also lower against the Japanese yen even as inves-tor sentiment in the global financial markets is improving gradually on Thursday.
USDJPY failed to make a clear break above the 114.00 threshold earlier this week and remains under a limited selling pressure, holding above 113.00. On Wednesday, the pair was dragged down by risk aversion and lower US 10-year Treasury yields which declined to the lowest since late-October.
As the sentiment improves, the price could resume the upside move down the road. But the key obstacle for dollar bulls is Brexit-fuelled pound optimism. So any negative headline from London or Brussels could spark a bearish correction in the cable, which in turn will support the greenback.
In the short term, traders will focus on the US retail sales report. Market expectations are for a recovery in the retail sales excluding cars by 0.5% versus the previous result of -0.1%. If so, the USD bulls will regain control as strong numbers will cement the December rate hike expectations.