The dollar regained its poise against most major currencies on Monday, with sentiment boosted by a strong step in avoiding a US debt default.
Trading volumes are expected to be thinner on Monday, with financial markets closed in London for the Spring Bank Holiday and New York shut for Memorial Day.
Against the euro, the pound edged up to EUR1.1520 on Monday afternoon, from EUR1.1514 around the same time on Friday.
US President Joe Biden and the Republican leader of the House of Representatives, Kevin McCarthy, have sealed their compromise for a bill to avert the insolvency of the US, Biden said on Sunday.
Biden called on Congress to immediately pass the agreement to raise the US debt ceiling until 2025 in exchange for significant spending cuts. A vote in the House is scheduled for Wednesday.
The euro traded at USD1.0716 on Monday afternoon UK time, lower than USD1.0746 on Friday. Against the dollar, the pound pulled back to USD1.2343 from USD1.2374.
"While the agreement is good news and has elevated the risk-on tone, investors are not becoming overly exuberant given that the bill still needs to be voted on this week," Rand Merchant Bank analysts said.
Nevertheless, the US currency regained some ground it had lost on Friday, despite a surprise pick-up in a key US inflation gauge.
On Friday, annual core personal consumption expenditures - the Fed's preferred inflationary reading - grew 4.7% year-on-year in April, picking up speed from 4.6% in March.
It sat at 4.7% in each of January and February, following an uptick from 4.6% in December. It had then abated to the December level in March.
Another year-on-year reading of 4.6% was expected for April, according to FXStreet cited consensus, so the reading came in slightly hotter than forecast and has poured some cold water on hope that the Federal Reserve will soon cut interest rates.
"Some market participants are betting that the June pause needs to be put on pause as the hotter-than-expected inflation data hint that Fed might not yet be done with its rate-hiking campaign," said SPI Asset Management's Stephen Innes.
"The data underscores the central bank's challenge: officials have been divided over whether to back off their rate-hiking campaign. Additional hot data could tilt them more in favour of further tightening in June or later this year."
Versus the yen, the dollar advanced to JPY140.25 on Monday afternoon in London, from JPY140.05 on Friday. The dual boost of the optimism from the US debt ceiling progress and the weak yen helped to drive Japanese equities higher, with the Nikkei 225 index closing up 1.0% in Tokyo - a new 33 year high.
Against the Swiss franc, the greenback edged up to CHF0.9035 from CHF0.9032.
The dollar was slightly weaker against commodity-backed currencies, however.
Versus the Australian dollar, the US currency was changing hands at AUD1.5289, down from AUD1.5309. Against its Canadian counterpart, the buck fell to CAD1.3591 from CAD1.3622.