The pound plummeted on Tuesday as the latest UK PMIs printed well below expectations.
Sterling is mostly flat so far this morning, with GBP/EUR stable at €1.171 and GBP/USD muted at $1.3271. GBP/CAD is rangebound at C$1.7141, while GBP/AUD and GBP/NZD hold steady at AU$1.8585 and NZ$1.9632, respectively.
Looking ahead, investors are likely to brace for more Covid related volatility today amidst thinning trade ahead of the holidays.
The pound firmed during yesterday’s trading session, underpinned by Boris Johnson’s confirmation that there will be no lockdown before Christmas.
What’s been happening?
The upside in Sterling was reinforced by Chancellor, Rishi Sunak’s announcement of a new £1bn support package for business suffering due to the impact of the Omicron Covid variant.
Tempering the pound’s gains however was the publication of the Confederation of British Industry’s distributive trends index, which reported retail activity in the UK slumped to its worst levels since March this month.
The euro, meanwhile, stumbled on Tuesday following the release of the Eurozone’s consumer confidence index which reported consumer morale in the bloc slumped to a nine-month low in December, amid mounting concern over the Omicron Covid variant.
At the same time, a prevailing risk-on mood, coupled with concerns that Joe Biden’s $1.75tn spending bill is effectively dead in the water, saw the US dollar weaken again during yesterday’s European trading session.
Looking ahead, with Omicron still dominating headlines, it’s likely the currency market will remain highly sensitive to Covid developments.
What’s coming up?
Elsewhere, the pound could face some pressure this morning after the UK’s latest GDP figures saw domestic growth revised lower in the third quarter.
Coming up this afternoon, the focus for USD investors will be on the latest US GDP release, with the US dollar potentially being infused with some volatility if the finalised figures for the third quarter shows any surprises.
Finally, with EUR data releases thin on the ground today, the direction of the euro is likely to be determined by European Covid headlines, potentially leading to pressure as more countries reimpose restrictions as Omicron spreads.
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)