The US dollar fell sharply on Monday as risk-on trade and falling US Treasury yields weighed heavily on the safe-haven currency.
Sterling continues to accelerate in anticipation of a Brexit deal this morning, with GBP/EUR rising to €1.1113 and GBP/USD jumping to $1.3566. GBP/CAD has climbed to C$1.7416, while GBP/AUD and GBP/NZD buoyed at AU$1.7863 and NZ$1.9097, respectively.
Looking ahead, with a Brexit trade deal expected to be announced in the coming hours, we expect to see GBP exchange rates skyrocket.
What’s been happening?The pound was catapulted higher yesterday, amidst multiple reports that the UK and EU are extremely close to signing a Brexit trade deal.
While GBP investors have heard similar things before, the suggestion that EU officials had begun preparing to approve a provisional application, so that it is in place for 1 January, seemed to provide more weight to the reports.
However somewhat tempering Sterling’s gains was the news that millions more people in the UK would be moved into the highest tier of coronavirus restrictions from Boxing Day.
The euro also trended higher on Wednesday, with the single currency also benefiting from the Brexit optimism, as well as the improvement in market sentiment, with investors welcoming freight movement resuming between the UK and France.
The US dollar, meanwhile, came under some pressure through yesterday’s session.
After initially rallying following Donald Trump’s threat not to sign the new US stimulus bill, the ‘Greenback’ began to fall back through the European session on the expectation that the US Senate will be able to pass the bill even if it is vetoed by the president.
Further dampening the appeal of the US dollar were some worrying income figures, as a larger-than-expected contraction in personal income stoked concerns that households will face more pressure to rein in spending, slowing the US economic recovery.
What’s coming up?Turning to today’s session, there is no doubt that Brexit headlines will dominate movement in the pound.
The general consensus is that the UK and EU will finally announce that a trade deal has been struck today, and as such we expect to see Sterling roar higher.
The euro is also set to rally on the back of a Brexit deal today, albeit to a lesser extent than the pound.
Meanwhile, the US dollar may struggle to attract support through today’s session in the face of thin trading conditions and prevailing upbeat market tone.
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)