Dollar Sinks Against British Pound After May Calls For "Hard Brexit"

The dollar is losing ground against all of its major rivals Tuesday afternoon, but its losses are the most pronounced against the British pound. The pound surged in value following today's highly anticipated speech by U.K. Prime Minister Theresa May.

May stated that the U.K. is set for a 'hard Brexit', which implies a complete separation from the European Union. She went on to say that her country will not remain a member of the single market.

Britain will not seek to "hold on to bits of [EU] membership" and the country also will not seek to adopt models that are enjoyed by other countries, May said in a speech at the Lancaster House.

"Not partial membership of the European Union, associate membership of the European Union, or anything that leaves us half-in, half-out," she said as she laid out a 12-point 'Brexit' plan.

"We seek a new and equal partnership - between an independent, self-governing, Global Britain and our friends and allies in the EU," the British premier said.

The country will also not seek to remain in the single market, as it would "mean not leaving the EU at all", May said. However, the country will try to gain the "greatest possible access" to it.

May also said her government will seek a 'bold and ambitious' free trade agreement with the EU and would seek to remove all sorts of barriers possible to trade. The days of the UK making vast contributions to the EU will end, she added.

The dollar has dropped to over a 1-week low of $1.2385 against the pound sterling Tuesday afternoon, from an early high of $1.2036.

U.K. inflation reached its highest level in more than two years at the end of 2016 on air fares and food prices.

Consumer price inflation increased more-than-expected to 1.6 percent in December from 1.2 percent in November, the Office for National Statistics reported Tuesday. This was the highest rate since July 2014 and above the expected rate of 1.4 percent.

British house price inflation accelerated for the first time in five months in November, though marginally, figures from the Office for National Statistics showed Tuesday. The house price index climbed 6.7 percent year-over-year in November, faster than the 6.4 percent rise in the previous month.

The buck has tumbled to over a 1-month low of $1.07 against the Euro Tuesday afternoon, from an early high of $1.06.

German economic sentiment improved to its highest level in seven months in January, as expectations were boosted by a strong run of positive data towards the end of last year.

The ZEW Indicator of Economic Sentiment for Germany rose to 16.6 from 13.8 in December, the Mannheim-based Centre for European Economic Research/ZEW said Tuesday. However, economists had forecast a score of 18.4.

The greenback has fallen to over a 1-month low of Y113.025 against the Japanese Yen this afternoon, from an early high of Y114.281.

Japan's industrial production increased as initially estimated in November, final figures from the Ministry of Economy, Trade and Industry showed Tuesday. Industrial production rose a seasonally adjusted 1.5 percent month-over-month in November, after remaining flat in the previous month. That was in line with the flash data published on December 27.

Growth in New York manufacturing activity has seen a modest slowdown in the month of January, according to a report released by the Federal Reserve Bank of New York on Tuesday. The New York Fed said its general business conditions index edged down to 6.5 in January from a revised 7.6 in December, although a reading above 50 still indicates growth.

Economists had expected the general business conditions index to dip to 8.0 from the 9.0 originally reported for the previous month.