The US dollar fell to two-week lows against its major rivals yesterday after concerns over the US economy’s resilience sapped USD demand.
Having plummeted at the end of last week, the pound is on a slightly firmer footing this morning, with GBP/EUR steady at €1.1040 and GBP/USD rallying to $1.2353. GBP/CAD has jumped to at C$1.7117, while GBP/AUD and GBP/NZD have surged to AU$2.0028 and NZ$2.0466 respectively.
Coronavirus will continue to act as the main catalyst of movement this week.
What’s been happening?
The US dollar remained in a position of strength on Friday, with the safe-haven currency in high demand as coronavirus panic continued to grip markets.
Meanwhile, the pound dove at the end of last week’s session, driven lower by the release of the EU’s 441-page draft treaty regarding trade talks with the UK.
The document laid bare the division between the EU and UK over their future relationship, with Brussel’s aim to ensure ‘uniform implementation’ of EU rules on state aid and authority of the European court of justice over British courts likely being impossible for UK negotiators to accept.
The euro also came under pressure on Friday, with the single currency weakening after European commission President Ursula von der Leyen announced a €37bn coronavirus ‘investment initiative’ to help limit a ‘major shock’ to European economies.
What’s coming up?
Looking to the week ahead it seems safe to assume that coronavirus developments will continue to dominate market sentiment, which could lend support to USD.
However, any upside in USD exchange rates could be tempered after the Federal Reserve slashed interest rates to near zero over the weekend in an effort to limit the economic impact of the coronavirus.
For GBP investors the focus will be on the UK’s coronavirus situation. Will the UK government follow other European countries in shutting schools and businesses?
Finally, the euro may face some headwinds this week if Eurozone countries resort to even more drastic measures in an attempt to halt the spread of the coronavirus.
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)