FXpert

The euro and British pound rallied against the U.S. dollar on Friday after Bloomberg News reported that British Prime Minister Theresa May is ready to drop a key Brexit demand in order to make a deal for Britain to leave the European Union (EU).

The pound rose on Friday after EU Brexit negotiator Michel Barnier said a deal with the United Kingdom was 90 percent done, although undercurrents of uncertainty in Britain kept the gains in check.

Japanese Finance Minister Taro Aso said on Friday that a U.S. government report on currencies did not suggest Tokyo's foreign-exchange policy was inappropriate and that Washington's assessment would not restrict Japan's currency management.

Sterling fell to the lowest level in 10 days against the dollar on Thursday, extending earlier losses after Prime Minister Theresa May said the European Union's proposal on the border was unacceptable.

Short positions on most Asian currencies were seen unwinding over the past two weeks, a Reuters poll showed on Thursday, with traders turning sceptical of the dollar's bull run after U.S. retail sales data came in below expectations.

Sterling weakened on Wednesday after data showed inflation fell more than expected in September and before a European Union summit at which Britain will try to unblock stalled negotiations for a Brexit deal.

The U.S. dollar index was little changed on Tuesday while emerging market currencies outperformed, as rising stock markets reflected an improved risk appetite.

The U.S. dollar index rose to its highest levels in a week on Wednesday after minutes from the Federal Reserve’s September meeting affirmed expectations that the U.S. central bank is likely to continue raising interest rates.

London and Brussels are nearing the Brexit endgame, but sterling may be subject to big swings regardless of whether they soon cut a deal - keeping investors looking to bet on the next big direction for the currency on their toes.