The US dollar fell sharply on Monday as risk-on trade and falling US Treasury yields weighed heavily on the safe-haven currency.
However, Sterling is largely rangebound so far this morning, following some profit taking on Monday, with GBP/EUR muted at €1.1024 and GBP/USD climbing to $1.3513. GBP/CAD is flat at C$1.7318, while GBP/AUD and GBP/NZD hold steady at AU$1.7774 and NZ$1.8946, respectively.
Looking ahead, will we see concerns over the spread of the new coronavirus variant dampen market sentiment amidst the post-Christmas lull?
What’s been happening?The pound received an early Christmas present last week, with the announcement that the UK and EU had finally signed a Brexit trade agreement helping to catapult the currency higher.
Despite some ‘last-minute hitches’ which delayed the announcement of the deal until after many traders had gone home for the holidays, the relief in markets was palpable.
However, Sterling has already fallen victim to some profit trading at the start of this week, as well as concerns that the Brexit trade deal does not cover the crucial service sector.
Meanwhile, the euro was also offered some support by the Brexit deal announcement last week, although this has been tempered somewhat by growing concerns over the spread of the new coronavirus strain in parts of Europe.
At the same time, the US dollar was able to hold its ground on Thursday, amidst doubts over the US stimulus package, after Donald Trump’s refusal to sign the bill earlier in the week.
What’s coming up?Turning to today’s session, with the jubilation over the Brexit trade deal already beginning to fade, the upside potential of the pound is looking increasingly limited, especially in light of recent UK coronavirus headlines, which are stoking fears the country could face another lockdown.
The euro could also fall afoul of coronavirus developments today as the new variant has now been detected through most of Europe.
Meanwhile, relief that Trump relented and signed the $900bn US stimulus bill has helped to drive a rally in equity markets at the start of this week, which in turn is likely to dampen demand for the safe-haven US dollar today.
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)