The US dollar strengthened on Thursday as USD investors cheered the release of some stronger-than-expected US economic releases.
Having mounted a comeback overnight, Sterling appears to be holding its ground so far this morning, with GBP/EUR flat at €1.0992 and GBP/USD rangebound at $1.3421. GBP/CAD is stable at C$1.7276, while GBP/AUD and GBP/NZD are holding steady at AU$1.7766 and NZ$1.9008 respectively.
Looking ahead, we may see more volatility in the Pound today as the UK government scrambles to restart freight movements with France.
What’s been happening?
The pound fell off a cliff at the start of this week’s session, with Sterling shedding over 1% against the euro and US dollar through yesterday’s European trading session.
Sterling’s losses were driven by fears over the emergence of a more viral strain of the coronavirus in the UK and concerns over France’s decision to block freight from the UK.
However, the pound was able to claw back a good portion of its losses later in the evening amid reports of potential movement in Brexit talks pertaining to fishing rights.
The US dollar, meanwhile, bolted out of the gate this week as coronavirus panic gripped markets, prompting an equity sell-off that fuelled demand for the safe-haven ‘greenback’, although these gains were tempered by US stimulus optimism.
Trade in the euro was mixed on Monday, with the single currency initially retreating amid the coronavirus sell-off before staging a recovery, aided by a marked improvement in Eurozone consumer confidence this month.
What’s coming up?
Turning to today’s session, it seems likely trade in the pound will stay choppy as concerns over the new strain of coronavirus (and its impact on the UK economy) remains a key catalyst of movement.
Brexit may infuse further volatility into GBP exchange rates as considerable uncertainty remains in spite of the recent reports of progress in regards to fishing.
On the other side of the Channel, in the absence of any notable data releases, EUR investors are likely to keep a close eye on coronavirus headlines from the Eurozone. Any outbreak of the new variant of Covid could result in tighter restrictions being introduced throughout the bloc.
During all this uncertainty we’re likely to see demand for the US dollar remain robust as investors continue favouring safe-haven assets.
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)