The pound plummeted on Tuesday as the latest UK PMIs printed well below expectations.
Sterling is off to a poor start so far this morning with GBP/EUR retreating to €1.1731 and GBP/USD sliding to $1.3206. GBP/CAD is rangebound at C$1.7066, while GBP/AUD and GBP/NZD are stable at AU$1.8627 and NZ$1.9669, respectively.
Looking ahead, a relatively quiet data calendar may see movement in the currency market dominated by Omicron developments this week.
The pound retreated at the end of last week as GBP investors grew increasingly unsettled by startling rise of Covid cases in the UK, amidst fears it will force the government to tighten restrictions sooner rather than later.
What’s been happening?
This offset the publication of some upbeat retail sales figures, which revealed sales growth in the UK climbed from an upwardly revised 1.1% to 1.4% last month.
The euro also softened on Friday, with EUR investors less-than-enthused by the publication of the latest Ifo business climate index in Germany, after it reported business morale in the Eurozone’s largest economy fell for the sixth consecutive month in December.
This coincided with a warning from German health minister, Karl Lauterbach, warning that the country faces a ‘massive fifth wave’ of Covid infections due to Omicron.
The US dollar, meanwhile, was able to attract support at the end of last week’s session as souring market sentiment saw investors favour the safe-haven currency.
Turning to the start of this week’s session we may see Omicron headlines act as a key catalyst of movement in currency markets.
What’s coming up?
The pound may be particularly sensitive to this as surging infections in the UK, stokes fears the government may need to impose a ‘circuit breaker’ lockdown before the end of the year, concerns over which may overshadow the publication of the Confederation of British Industry’s latest industrial trends orders later this morning.
With Covid cases also rising rapidly in mainland Europe, the euro could also come under pressure this week as more countries are forced to tighten restrictions.
Meanwhile, the US dollar’s safe-haven status means it stands to benefit if market sentiment is undermined by Covid concerns this week.
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)