The US dollar fell sharply on Monday as risk-on trade and falling US Treasury yields weighed heavily on the safe-haven currency.
Sterling is stable so far this morning, however, with GBP/EUR flat at €1.1401 and GBP/USD stable at $1.3763. GBP/CAD is rangebound at C$1.7524, while GBP/AUD and GBP/NZD are holding steady at AU$1.7841 and NZ$1.9018, respectively.
Coming up, could we see lingering coronavirus concerns drive some currency volatility today?
What’s been happening?The pound started slowly this week, with reports that Brexit red-tape has caused a 68% drop in UK exports to the EU prompting Sterling to dip through the first half of yesterday’s European session.
While the pound was able to claw back these losses later in the session, the upside in GBP exchange rates remained limited as Cabinet Minister Michael Gove suggested that ‘refinements’ are needed for the Northern Ireland Protocol, threatening to stoke UK-EU tensions.
The euro, meanwhile, also stumbled out of the gates this week, on the back of Germany’s weaker-than-expected industrial production figures.
However, the single currency was able to mount a convincing recovery towards the end of Monday’s European session, in response to some broad weakness in the US dollar.
This pullback in the US dollar was driven by the drop in US Treasury yields from an 11-month high, with the USD selloff accelerating overnight amidst improving market risk appetite in the wake of a rebound in equity markets.
What’s coming up?Looking ahead, in the absence of any notable data releases today, any movement in the pound is likely to be dictated by UK coronavirus developments, with concerns over the AstraZeneca vaccine’s effectiveness against the South African variant of coronavirus potentially raising concerns for GBP investors after the strain was found in the UK.
It's likely to be a similar story for the euro, with concerns over the pace of the EU vaccination rollout potentially dragging on the single currency.
Across the pond we are likely to see market sentiment and the direction of Treasury yields continue to drive USD exchange rates today, with the latest JOLTs job figures also being watched for any further sign of weakness in the US labour market at the end of 2020.
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)