The US dollar fell to two-week lows against its major rivals yesterday after concerns over the US economy’s resilience sapped USD demand.
After slumping yesterday, the pound looks to be clawing back some of its losses this morning, with GBP/EUR stable at €1.1932 and GBP/USD buoyed at $1.2950. GBP/CAD has firmed to C$1.7208, while GBP/AUD and GBP/NZD edge up to AU$1.9590 and NZ$2.0440 respectively.
Looking ahead, we expect the coronavirus to continue dominating market sentiment today, likely pushing USD exchange rates even higher.
What’s been happening?
The US dollar bolted out of the gate this week, with the safe-haven currency enjoying significant demand amid heightened fears over the coronavirus.
There is widespread panic that the outbreak could become a global pandemic, following a sharp rise in the number of cases being reported outside of China, with South Korea, Italy and Iran all battling major outbreaks.
The euro also found support on Monday, being buoyed by a stronger-than-expected business morale print from Germany this month.
However, simultaneously limiting the single currency’s gains were concerns regarding the jump in reported coronavirus cases in Italy.
Meanwhile, the pound trended lower yesterday as it was undermined by renewed Brexit uncertainty after Downing Street officials stated the government’s ‘primary objective’ in the upcoming trade talks was to end the transition period by the end of 2020, regardless of whether a deal has been reached.
What’s coming up?
Markets are likely to remain highly sensitive to coronavirus headlines today, and as such we are likely to see the US dollar remain in demand as investors continue to flock to safe-haven assets amid the increasingly bleak outlook from the World Health Organisation (WHO).
In Europe the final release of Germany’s fourth quarter GDP figures may cap any upside in the euro today after they confirmed the Eurozone’s largest economy stagnated at the end of 2019.
For GBP investors the focus may be on the Confederation of British Industry’s (CBI) distributive trades index, where the first positive retail reading since April may help to support the pound.
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)