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GBP/USD slips to $1.34 as souring market mood bolsters the US dollar

currency-newsGBP/USD slips to $1.34 as souring market mood bolsters the US dollar
The US dollar rocketed against its peers on Monday as souring market sentiment buoyed demand for the safe-haven currency.
 
Meanwhile, Sterling is trading in a narrow range so far this morning, with GBP/EUR stable at €1.1141 and GBP/USD edging higher at $1.3551. GBP/CAD is rangebound at C$1.7275, while GBP/AUD and GBP/NZD hold steady at AU$1.7543 and NZ$1.8857, respectively.
 
Coming up today, we are likely to see coronavirus developments continue to drive market sentiment, likely leading to more cautious trade flows.
 

What’s been happening?

The US dollar shot higher at the start of this week, with jittery investors flocking to the safe-haven currency amidst a slump in equity markets.
 
This equity sell-off was driven by a souring of market sentiment, with renewed coronavirus concerns and indications that the Federal Reserve isn’t planning to top up its monetary stimulus dampening the mood.
 
This uptick in the US dollar came at the detriment to the euro due to the negative correlation in the pairing.
 
The pound, meanwhile, struck lower against both the US dollar and the euro amidst warnings from health experts for England to prepare for the worst weeks of the pandemic, while vaccines minister Nadhim Zahawi suggested that stricter restrictions could be imposed if cases continue to surge.
 

What’s coming up?

Looking ahead, with UK coronavirus cases continuing to surge and the threat of stricter restrictions looming, it’s likely Sterling sentiment will remain largely dejected through today’s trade session.
 
Also of note to GBP investors will be a speech by Bank of England (BoE) policymaker Ben Broadbent, who could lend some support to the pound today if he echoes recent comments from his colleague Silvana Tenreyro regarding the need for more monetary stimulus.
 
In Europe, as the rate of infection also continues to rise, we could see the euro also face some headwinds today, particularly amidst ongoing concerns over the slow pace of vaccine rollouts in the bloc.
 
In light of the ongoing concerns over the pandemic, it’s likely we will see trade in the US dollar remain robust today as investors seek to avoid exposing themselves to any potential risk.
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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