The euro and sterling have edged higher against the dollar today after the United Kingdom and the European Union agreed a draft text setting out their future relationship before a summit on Sunday.

Traders are cautiously optimistic about the draft declaration agreed by the UK and the European Commission that outlined how the trading relationship, security and other matters will work once the divorce is finalised.

The euro and sterling are trading marginally higher, having advanced overnight by 0.2% and 0.8% respectively.

Traders are still waiting for more clarity around the Brexit deal as it faces a rocky ride once it reaches a deeply divided British parliament, with hardline eurosceptic and staunch pro-EU factions, and various shades of gray in-between.

Shortly before 8am the euro was trading at £0.887 and $1.141.

"A full read through of the text suggests a lot of important details need to be clarified. ..this document is not convincing the market that it will pass through parliament," said David de Garish, director economics and markets at NAB.

He said the market is still positioned with a short bias in the pound, so there is scope for a move of 5-10 percent if a breakthrough deal is achieved.

The dollar index, a gauge of its value versus six major peers, traded marginally lower at 96.46.

Much of the weakness is due to the strength in the euro and sterling, which together constitute 70% of the index.

The dollar has lost ground for two consecutive trading sessions and is drifting lower from a 16-month high of 97.69 hit earlier this month.

Dollar sceptics are concerned about the pace of future interest rate increases by the US Federal Reserve.

The Fed is expected to deliver its fourth rate hike of 2018 in December, but markets are trying to gauge how much tighter can policy get next year without risking a slowdown in the domestic economy, which has so far held up well even as borrowing costs have risen.

"The Fed is most likely to hike rates in December. I don't see a shift in forward guidance at next month's meeting as that would imply that a significant deterioration in economic activity is already taking place," said Mr De Garish.