- Vote on UK PM May's leadership at 1800 to 2000 GMT
- Italy to submit budget to EU with lower debt target - report
- Dollar's losses limited by higher yields, in-line CPI
- Graphic: World FX rates in 2018 http://tmsnrt.rs/2egbfVh
(Updates market action, changes dateline, previous LONDON)
The pound jumped on Wednesday, rebounding from a 20-month low, as traders bet UK Prime Minister Theresa May would survive a no-confidence vote on her leadership, allowing her to salvage her deal for Britain to exit the European Union.
A Bloomberg report on a revised Italian budget proposal to the European Union that is lighter on debt lifted the euro from a near 1-1/2 week low.
An index that tracks the dollar against a basket of currencies that includes the euro and sterling retreated below a near one-month peak reached on Tuesday.
Even if May fends off the challenge to her leadership triggered by her own Conservative party, it remains uncertain whether she has enough support for her Brexit deal with Brussels, analysts said.
"Accordingly, sterling upside could be limited if May wins the leadership challenge unless or until there are clearer signs that parliament is willing to pass the withdrawal deal," Erik Nelson, currency strategist at Wells Fargo Securities, said in a research note.
A secret ballot on the no-confidence vote on May will be held between 1 p.m. and 3 p.m. ET (1800 and 2000 GMT) in a room at the House of Commons, and an announcement is due at 4 p.m. ET (2100 GMT).
At least 185 of her 315 Conservative lawmakers had expressed public support for her by 10:13 a.m. ET (1513 GMT), according to a Reuters tally.
At 10:23 a.m. (1523 GMT), the sterling GBP=D3 was 1.25 percent higher at $1.2641, bouncing from a 20-month low of $1.2477 set earlier Wednesday.
The euro EURGBP=D3 was down 0.76 percent at 89.95 pence. Against the dollar, the single currency EUR=EBS gained 0.47 percent at $1.1371. It was bolstered by a Bloomberg report that Italy is to propose a budget deficit target of 2 percent, below the previous target of 2.4 percent which Brussels rejected earlier.
The dollar index .DXY was down 0.31 percent at 97.088. The greenback's losses were limited by higher U.S. bond yields and in-line data on domestic consumer prices in November which showed the underlying inflation trend remains firm.
The latest CPI report supported the view the Federal Reserve would raise key short-term lending rates by a quarter point to 2.25-2.50 percent at its upcoming two-day policy meeting.
The futures market implied traders saw a 78 percent chance the U.S. central bank would increase rates for a fourth time in 2019 next week, slightly higher than 76 percent late on Tuesday, according to CME Group's FedWatch program.
======================================================== Currency bid prices at 10:24AM (1524 GMT)Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Euro/Dollar EUR= $1.1371 $1.1314 +0.50% -5.21% +1.1372 +1.1314 Dollar/Yen JPY= 113.2600 113.3700 -0.10% +0.52% +113.5100 +113.2400 Euro/Yen EURJPY= 128.79 128.30 +0.38% -4.71% +128.8300 +128.3000 Dollar/Swiss CHF= 0.9919 0.9933 -0.14% +1.81% +0.9965 +0.9920 Sterling/Dollar GBP= 1.2640 1.2484 +1.25% -6.45% +1.2646 +1.2479 Dollar/Canadian CAD= 1.3335 1.3388 -0.40% +6.03% +1.3398 +1.3333 Australian/Doll AUD= 0.7228 0.7206 +0.31% -7.36% +0.7230 +0.7199 arEuro/Swiss EURCHF= 1.1279 1.1240 +0.35% -3.51% +1.1296 +1.1236 Euro/Sterling EURGBP= 0.8994 0.9061 -0.74% +1.25% +0.9069 +0.8985 NZ Dollar/Dolar NZD= 0.6854 0.6876 -0.32% -3.27% +0.6900 +0.6825 Dollar/Norway NOK= 8.5633 8.5760 -0.15% +4.34% +8.5937 +8.5619 Euro/Norway EURNOK= 9.7379 9.7078 +0.31% -1.12% +9.7422 +9.7036 Dollar/Sweden SEK= 9.0960 9.0880 +0.56% +10.90% +9.1618 +9.0729 Euro/Sweden EURSEK= 10.3430 10.2849 +0.56% +5.12% +10.3775 +10.2743 <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ FX Valuations http//tmsnrt.rs/2SIjXel^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
