GBP/USD slumps to $1.38 as skittish investors favour the safe-haven US dollar

The US dollar struck higher on Friday, with the currency being bolstered by rising US Treasury yields and safe-haven demand.
 
Having retreated at the end of last week, the pound appears to have stabilised so far this morning, with GBP/EUR flat at €1.1652 and GBP/USD muted at $1.3843. GBP/CAD is rangebound at C$1.7319, while GBP/AUD and GBP/NZD hold steady at AU$1.7939 and NZ$1.9360, respectively.
 
Looking ahead, a slew of high impact UK data releases this week could help to distract GBP investors from an impending vaccine shortage.
 

What’s been happening?

The US dollar came out on top at the end of last week’s session, as the currency rose in tandem with US Treasury yields as they climbed to new multi-year highs.
 
Demand for the safe-haven ‘Greenback’ was further bolstered by renewed tensions between the US and China as the two powers clashed at high-level talks overnight on Thursday.
 
This uptrend in the US dollar came at the expense of the euro, with the negative correlation between the pairing leaving the single currency on the defensive.
 
This was exacerbated by fears of a third wave of coronavirus infections in Europe, amidst surging cases in many parts of the Eurozone and the announcement of new lockdown measures in Paris.
 
Finally, we saw the pound close last week’s session on the back foot as GBP investors grew increasingly unnerved by the recent warning from the NHS that it faces a ‘significant shortage’ of coronavirus vaccines next month, with concerns this could lead to delays in the UK’s economic reopening.
 

What’s coming up?

Looking ahead to this week, it looks to be a busy session for GBP investors who will have a glut of high impact UK data releases to digest.
 
The data dump will be kicked off by the publication of the UK’s latest jobs report. January’s figures are expected to report a rise in unemployment, but will another robust wage growth reading help to limit any downside in the pound?
 
The euro could face an uphill battle this week as Europe’s coronavirus situation appears to have deteriorated further, with the imposing of fresh restrictions in Germany and other countries likely to put significant pressure on the single currency.
 
Meanwhile, with concerns over Europe’s third wave of coronavirus infections likely to dampen market sentiment this week, we could see demand for the safe-haven US dollar accelerate.