GBP/USD struggles for direction amid Brexit trade friction
Philip McHugh January 26th 2021 - 2 minute read
Trade in the pound was mixed on Monday as some Brexit concerns were offset by suggestions England’s lockdown measures could be eased next month.
Meanwhile, Sterling is struggling this morning with GBP/EUR slipping to €1.1233 and GBP/USD retreating to $1.3619. GBP/CAD is subdued at C$1.7388, while GBP/AUD and GBP/NZD hold steady at AU$1.7729 and NZ$1.8971, respectively.
This downturn in the pound comes in the wake of the UK’s latest unemployment figures, which reported the jobless rate climbed to 5% in November.
What’s been happening?
The pound was mostly rangebound at the start of this week, driven by a mix of Brexit and coronavirus developments.
Dragging on Sterling sentiment were growing concerns that trade friction between the UK and EU is putting increasing pressure on the UK economy as British exporters struggle with red tape.
However, GBP exchange rates were propped up by Boris Johnson’s suggestion that the government will be ‘looking at the potential of relaxing some measures’ in February.
The euro, meanwhile, dipped on Monday following the publication of the latest German IFO business climate index. January’s index printed well below expectations, with business morale slumping to a six-month low and stoking concerns over the health of the Eurozone’s largest economy at the start of 2021.
At the same time, the US dollar made some modest gains during yesterday’s session, with investors favouring the safe-haven currency amidst reports of some bipartisan pushback against President Biden’s $1.9 trillion stimulus package.
What’s coming up?
Kicking off today’s session was the publication of the UK’s latest Jobs report.
This left the pound on the back foot at the start of the European session as the report revealed that unemployment in the UK rose to 5% for the first time since 2016 in November.
However, Sterling’s losses have been capped as the accompanying earnings figures showed a considerable acceleration of wage growth over the same period.
In the absence of any notable Eurozone data releases today, the focus for EUR investors is likely to be on European coronavirus developments, where concerns over vaccination delays may put pressure on the single currency.
At the same time, USD investors are likely to remain focused on Biden as the US president continues to set out his plans on how to revive the US economy.