The US dollar fell sharply on Monday as risk-on trade and falling US Treasury yields weighed heavily on the safe-haven currency.
Meanwhile, Sterling is struggling to find momentum this morning, with GBP/EUR muted at €1.1064 and GBP/USD flat at $1.3648. GBP/CAD is rangebound at C$1.7281, while GBP/AUD and GBP/NZD retreat to AU$1.7510 and NZ$1.8711, respectively.
Looking ahead, the focus today looks to be on Germany’s latest inflation reading, with another month of deflation likely to put some pressure on the euro.
What’s been happening?The pound struggled to find support yesterday, with suggestions from Michael Gove that the UK’s new lockdown measures could remain in place until March unnerving markets, amidst concerns over the potential damage to the UK economy.
However, Sterling was prevented from registering any real losses thanks to Chancellor Rishi Sunak’s announcement of an additional £4.6bn in support to businesses and the extension of the furlough scheme to the end of April.
At the same time, the euro was also mostly directionless on Tuesday as concern over the slow pace of vaccinations in the EU weighed on the single currency, with the appeal of the euro further undermined by another contraction in German employment growth in December.
The US dollar, meanwhile, initially started steadily yesterday, before rising optimism for a clean sweep for the Democrats in Georgia’s state runoffs bolstered market sentiment and dented demand for the safe-haven ‘Greenback’.
Adding to the upbeat mood was the publication of the latest ISM manufacturing PMI, which reported US factory activity soared to a two-year high in December.
What’s coming up?Turning to today’s session the focus is likely to be on Germany’s latest consumer price index.
December’s CPI figures are expected to report that the Eurozone’s largest economy suffered its fourth straight month of deflation, and as such we could see the euro weaken later this afternoon.
For GBP, the spotlight today looks to be on a speech by Bank of England (BoE) Governor Andrew Bailey later this afternoon.
Bailey may put a dent in the pound as he will no doubt comment on the UK’s new lockdown, likely warning that it will inevitably result in the BoE revising its growth forecasts lower for 2021.
Meanwhile, the US dollar is likely to remain pressured through today’s session as markets brace for what is expected to be a Democrat victory in Georgia’s state runoff.
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)