The US dollar fell sharply on Monday as risk-on trade and falling US Treasury yields weighed heavily on the safe-haven currency.
Meanwhile, the pound is trading in a narrow range so far this morning, with GBP/EUR flat at €1.1338 and GBP/USD stable at $1.3702. GBP/CAD and GBP/NZD are holding steady at C$1.7550 and NZ$1.9076, respectively, while GBP/AUD has climbed to AU$1.7965.
Centre stage today are the Eurozone’s latest GDP figures. Will a smaller-than-expected contraction of growth allow the euro to claw back some ground today?
What’s been happening?The US dollar shot higher at the start of this week as risk-off flows continued to dominate markets, ensuring investors continued to favour the safe-haven currency.
The souring of market sentiment appeared to be mostly driven by US stimulus uncertainty as well as another chaotic day in financial markets as an army of retail traders reportedly made the jump from equities to commodities, propelling silver to an eight-year high.
This surge in the US dollar boded poorly for the euro yesterday, with the negative correlation between the pairing, as well as a record slump in Germany’s latest retail sales figures, taking its toll on EUR exchange rates.
The pound, meanwhile, firmed on Monday after Boris Johnson expressed optimism over the UK’s fight against the coronavirus, bolstering speculation the government could look to start easing its lockdown this month.
What’s coming up?Turning to today’s session, the spotlight will be on the Eurozone’s latest GDP release.
The consensus forecast puts the Eurozone economy contracting by 1% in the fourth quarter of 2020, as most of the bloc found itself back in lockdown as a second wave of coronavirus cases spread like wildfire throughout Europe.
However, with Germany’s recent GDP figures beating forecasts, there may be some scope for the Eurozone figures to also print above expectations, which if true, could allow the euro to attempt a comeback this morning.
For GBP investors, the focus is likely to remain on UK coronavirus developments, with the pound poised to strengthen should the ‘vaccine trade’ kick in once again.
Meanwhile, the US dollar may maintain its bullish trajectory today as the ongoing stock market uncertainty leaves many investors cautious.
Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure
Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)