Pound (GBP) Strengthens against Euro and US Dollar ahead of Brexit Negotiations
The Pound (GBP) ended last week rangebound, but found some gains against the Euro, as concerns mounted over the threat of a wave of UK job losses and the possibility of stricter restrictions set to weigh on the UK economy.
After the Pound had initially strengthened on hopes for UK Chancellor Rishi Sunak’s ‘Winter Economy Plan’, Sterling sentiment weakened as some investors feel it fails to go as far as the current furlough scheme. Meanwhile, record UK borrowing hitting more than 100% of UK GDP also pressured Pound exchange rates.
The Pound to Euro exchange rate made some gains at the end of last week on optimism a trade deal can be agreed. This optimism appears to have carried through to this morning ahead of cabinet minister Michael Gove attending talks over the UK’s Brexit divorce deal and trade negotiations beginning tomorrow.
The Pound to Euro exchange rate is surging at the start of the week, hitting a multi-week high at €1.10. Meanwhile, the Pound to US Dollar has strengthened over a cent to a week-high $1.28.
Euro (EUR) Weakens as Coronavirus Restrictions Threaten Economic Recovery
The Euro (EUR) remained under pressure at the end of last week, slipping against GBP and USD as fears over Europe’s surge in coronavirus cases underpinned worries that the Eurozone economic recovery is stalling.
This view was supported as France, Spain and Holland appear likely to tighten restrictions, with ministers in Spain warning Madrid is at ‘serious risk’. Added to this, France’s latest unemployment benefit claims rocketed higher than forecast.
Looking ahead, European Central Bank (ECB) President Christine Lagarde’s opening statement at a European Parliament committee meeting could drive some movement in the Euro, as it’s likely she will address concerns over the strength of EUR exchange rates.
US Dollar (USD) Climbs on Safe-Haven Demand
The US Dollar (USD) continued to strike higher while safe-haven flows support USD exchange rates, with coronavirus cases rising weighing on the global economic outlook.
Risk-off trade buoyed the US Dollar and offset weaker-than-expected US durable goods orders as growth showed 0.4% month-on-month, fuelling concerns the US economy could also be stalling.
Turning to today’s session, market sentiment will likely continue driving USD demand, with a jump in Chinese industrial profits likely to improve market sentiment. At the same time, the US presidential election debate tomorrow could start to stoke US Dollar volatility as US political uncertainty increases.
Canadian Dollar (CAD) Undermined by Oil Demand Concerns
The Canadian Dollar (CAD) ended the week lower as worries over global demand for oil weighed on the commodity-correlated Canadian Dollar. This came despite a narrower-than-expected Budget Balance that suggested the Canadian economy is improving.
Australian Dollar (AUD) Ticks Higher as Market Sentiment Improves
The Australian Dollar (AUD) is strengthening this morning after Chinese data lifted market sentiment, boosting the ‘Aussie’
New Zealand Dollar (NZD) Makes Gains after Last Week’s Losses
The New Zealand Dollar (NZD) is also edging higher so far today as risk appetite picks up, while likely action from the Reserve Bank of New Zealand (RBNZ) looms.