Pound to US Dollar Touches Two-Month Low, GBP/EUR Weakens
The UK government announcement of new restrictions and risk-off trade has sent the Pound to US Dollar falling as low as $1.26 this morning. However, GBP/USD has recovered slightly back up to $1.27.
The increase in safe-haven demand and an optimistic Federal Reserve has pushed USD higher across the board, with the Euro to US Dollar exchange rate falling as low as $1.16 this morning.
Meanwhile, EUR remains muted but under pressure from coronavirus cases surging in Europe. Additionally, this morning’s PMI release showed Eurozone growth ground to a halt, although EUR/GBP is holding, with the Pound to Euro exchange rate weakening at €1.08.
Pound (GBP) Rangebound as New Coronavirus Restrictions Announced
The Pound (GBP) struggled to find support through yesterday’s trading session as Boris Johnson announced new nationwide restrictions aimed at curbing the UK’s coronavirus resurgence.
While the measures weren’t as strict as some investors had feared, the PM’s warning that ‘significantly greater restrictions’ may be necessary rattled some GBP investors.
However, the Pound was still able to avoid any meaningful losses as Bank of England (BoE) Governor Andrew Bailey sought to cool expectations the BoE could implement negative interest rates anytime in the near future.
Coming up, the publication of the UK’s latest PMI figures this morning is in in focus for GBP investors today. September’s preliminary figures dropped to a three-month low and point to a slowing of private sector growth compared to August’s reading.
At the same time, the manufacturing and service sectors both reported a drop new orders and future confidence, while also highlighting rising redundancies. This will likely weigh on the Pound to US Dollar and Euro exchange rates through today.
Euro (EUR) Pressured by Coronavirus Concerns
The Euro (EUR) remained subdued on Tuesday as Europe’s worrying coronavirus resurgence continued to take its toll on the single currency.
While governments are reluctant to impose national lockdowns again, a number of countries have started to impose new restrictions which are likely to disrupt the Eurozone’s recovery.
In the spotlight today will be the Eurozone’s preliminary PMIs for September released this morning.
These could put some considerable pressure on the Euro this morning as they revealed stalling private sector activity. While manufacturing came in better-than-forecast indicating modest growth, the service sector slumped into contraction.
This will likely fuel concerns the bloc’s economic recovery is running out of momentum. However, EUR exchange rates are holding, with the Pound to Euro exchange rate falling due to the UK’s concerning outlook, and EUR/USD steady at $1.17.
US Dollar (USD) Rallies on Upbeat Fed Outlook
The US Dollar (USD) struck higher yesterday, rising on the back of some cautious optimism from Federal Reserve Chair Jerome Powell and other Fed policymakers as they testified in front of Congress.
Further bolstering the ‘Greenback’ on Tuesday was a clear bias for safe-haven assets as increased concerns over the coronavirus soured market sentiment.
Looking ahead, the latest US PMI figures could drive movement in the US Dollar this afternoon. While not as influential as the ISM release, today’s IHS Markit figures may offer USD investors some insight into how the US private sector is faring this month.
Canadian Dollar (CAD) Buoyed by Oil Rally
The Canadian Dollar (CAD) ticked higher on Tuesday, with the commodity-sensitive ‘Loonie’ appreciating as oil prices began to recover some of yesterday’s losses.
Australian Dollar (AUD) Tumbles in Risk-Off Trade
The Australian Dollar (AUD) dived overnight on Tuesday, tumbling during the Asian trading session in response to renewed concerns over the coronavirus and fresh US-China tensions.
New Zealand Dollar (NZD) Dented by RBNZ Rate Decision
The New Zealand Dollar (NZD) also trended lower overnight after the Reserve Bank of New Zealand’s (RBNZ) latest rate decision.
While the RBNZ opted to keep rates on hold this month, its forward guidance indicated that the possibility of negative rates remains on the table, undermining the ‘Kiwi’.