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GBP/USD holds near one-month high in Christmas trade

currency-newsGBP/USD holds near one-month high in Christmas trade
Currency markets were paralyzed at the end of last week, as the closure of most major financial markets for Christmas Eve resulted in limited movement.

Meanwhile, the pound has moved higher post-Christmas, although it is trading in a narrow range this morning, with GBP/EUR edging higher at €1.1888 and GBP/USD subdued at $1.3417. GBP/CAD and GBP/AUD are softening at C$1.7197 and AU$1.8512, respectively, while GBP/NZD is steady at NZ$1.9741.

Looking ahead, thin trading conditions during the post-Christmas lull could greatly limit movement in the currency market this week.

What’s been happening?

The pound struggled to find any strong directional bias on Friday, leaving the currency to consolidate its gains from earlier in the week.

This resulted in the GBP/USD exchange rate closing the week at a one-month high amidst hopes the UK government may avoid imposing any more Covid restrictions after Christmas.

At the same time, the euro was also mostly flat at the end of last week amidst thin trading conditions, and ongoing concerns over the imposing of stricter Covid measures throughout most of the Eurozone.

Finally, the US dollar was left subdued in pre-Christmas trade as a prevailing risk-on mood sapped the appeal of the safe-haven ‘greenback’.

This offset an edging higher of US Treasury yields amidst some speculation the Federal Reserve could hike interest rates in March, once it finishes winding down its pandemic-era stimulus.

What’s coming up?

Looking ahead, a shortened week coupled with the absence of any notable data releases is likely to result in thin trading conditions in the run up to the new year.

As such, we assume movement in the currency market will remain limited over the next couple of days as the few market participants still trading are likely to be reluctant to make any aggressive bets this side of the new year.

However, soaring Covid-19 infections to record highs, the UK government holding off announcing stricter measures, and France tightening restrictions will likely stoke some volatility in currency markets.
Philip McHugh

Philip McHugh

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)

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