Growing doubts over the ability for the UK and EU to reach a trade agreement before the end of December limited the appeal of the pound.
Sterling remains resilient so far this morning, with GBP/EUR flat at €1.1020 and GBP/USD subdued at $1.3006. GBP/CAD is rangebound at C$1.7158, while GBP/AUD and GBP/NZD hold steady at AU$1.8260 and NZ$1.9468, respectively.
Looking ahead, fresh coronavirus concerns look to be souring the market mood today, potentially funnelling investors towards the safe-haven US dollar.
What’s been happening?The pound held its ground at the start of this week’s session, as some Brexit optimism helped to offset concerns over the UK’s rising coronavirus infections and speculation of a second lockdown.
This Brexit optimism seemed to stem from the news that the EU's chief Brexit negotiator, Michel Barnier, would be extending his stay in London following a weekend of intensive Brexit negotiations with his UK counterpart.
GBP investors interpreted this as a sign that positive progress is being made following the restart of trade talks last week.
At the same time, the euro found itself on the back foot yesterday as EUR investors grow increasingly alarmed by Europe’s coronavirus resurgence. Markets appeared particularly alarmed by reports Germany is set to impose stricter restrictions after Chancellor Angela Merkel warned Europe’s largest economy is ‘on the verge of losing control of the virus’.
Meanwhile, the US dollar benefited from the anxiety surrounding the coronavirus, as well as renewed doubts that a US stimulus package will be agreed before the US presidential election, both of which bolstered the appeal of the safe-haven currency.
What’s coming up?The only data release of note today will be the latest US durable goods orders.
September’s release is expected to show only a modest rise in order growth, something which could further sour market sentiment, and strengthen the US dollar.
For EUR investors, the focus will remain firmly on the Eurozone’s coronavirus woes. This is likely to see the euro remain on the defensive amidst the threat that countries in the bloc are set to impose increasingly strict restrictions in an effort to contain the pandemic.
Finally, the pound is likely to remain highly sensitive to Brexit developments through today’s trading session, with the potential for GBP exchange rates to strengthen if any positive developments emerge regarding ongoing trade talks.
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)