The US dollar fell sharply on Monday as risk-on trade and falling US Treasury yields weighed heavily on the safe-haven currency.
Sterling has moved sharply lower this morning amidst concerns over Brexit, with GBP/EUR tumbling to €1.1003 and GBP/USD slumping to $1.3305. GBP/CAD has fallen to C$1.7027, while GBP/AUD and GBP/NZD have plummeted to AU$1.7801 and NZ$1.8902, respectively.
Coming up, the European Central Bank (ECB) will deliver its latest rate decision today, with EUR investors bracing for some dovish easing from the bank.
What’s been happening?The pound rallied through the European trading session on Wednesday, as investors appeared hopeful that a post-Brexit trade deal between the UK and EU may still be possible.
This optimism came on the back of comments from UK Cabinet minister Micheal Gove, who suggested the UK may be willing to compromise with the EU on fishing rights, while German Chancellor Angela Merkel hinted the EU would compromise on the level playing field.
However, the Pound failed to sustain these gains after Boris Johnson's meeting with EU chief Ursula von der Leyen failed to break the deadlock in talks.
At the same time, the euro took a bit of a knock yesterday after Merkel pushed for Germany to implement tougher coronavirus restrictions over the holiday period, with EUR investors fearing that the closing of all non-essential stores for two weeks would make a double-dip recession in Europe’s largest economy inevitable.
The US dollar, meanwhile, came under some pressure yesterday as demand for the safe-haven currency was undermined by US stimulus optimism following comments from US Treasury Secretary Steven Munchin, who suggested the next package was 90% ready.
What’s coming up?With fears of a no-deal Brexit rising, the pound looks to trend lower this morning.
Further limiting the appeal of Sterling this morning is the publication of the UK’s latest monthly GDP release, which revealed slowing domestic growth in October.
Also in the spotlight today will be the conclusion of the European Central Bank’s (ECB) December policy meeting.
This is likely to see the ECB announce some more monetary easing with the expansion of its stimulus programme, which alongside a potentially dovish economic outlook for 2021 could see the euro face headwinds later today.
Last but not least, is the publication of the latest US consumer price index, where a possible slowing of domestic inflation could dampen the appeal of the US dollar this afternoon.
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)