GBP Undermined by Brexit and Coronavirus Concerns, Risk-off Tone Weighs on Pound to US Dollar
Pound exchange rates edged lower during yesterday’s trading session, with the Pound slipping against the Euro while the Pound to US Dollar managed to hold at $1.28.
This came as concerns over possible hurdles in Brexit talks as well as rising UK coronavirus cases weighed on the Pound exchange rates.
Added to this, Bank of England (BoE) governor Andrew Bailey repeated that negative interest rates could not be ruled out, but that the BoE are ‘realistic’ over the challenges of them.
This drove some volatility in the Pound to US Dollar exchange rate and GBP/EUR trended lower.
However, the main driver of movement was GBP investors growing increasingly concerned about the twin threat of a disruptive Brexit and a second wave of coronavirus cases could have on the UK economy, which has already shown signs of slowing again this month.
Looking ahead, the Pound is likely to remain vulnerable to additional losses as GBP investors remain cautious while the latest round of Brexit negotiations continue.
Euro (EUR) Accelerates on Improving Market Sentiment
The Euro (EUR) struck higher on Tuesday, reversing some of its losses from the start of the session as improving market sentiment helped to temper safe-haven demand.
This improvement in risk appetite lifted the Euro to US Dollar exchange rate by a cent.
However, the Euro’s gains were still capped by the publication of Germany’s latest consumer price index as they revealed Europe’s largest economy slipped into a state of deflation again this month.
Turning to today’s session, the Euro may look to extend these gains after data revealed German retail sales rebounded far faster than expected last month.
Meanwhile, Germany’s unemployment rate for September came in better than expected at 6.3%, down from 6.4%, which may offer Euro exchange rates some support.
The risk-off tone following the US presidential debate, however, has left the Euro to US Dollar weaker so far this morning.
US Dollar (USD) Strengthens Following Ugly Presidential Debate
The US Dollar (USD) was mostly rangebound through yesterday’s European session, with investors reluctant to make any bets on USD ahead of last night’s US presidential debate.
The debate itself saw Trump and Biden clash in a bitter and chaotic debacle, with Trump’s refusal to commit to accepting the election result stoking some market jitters and driving the safe-haven US Dollar higher.
In the aftermath of the debate and the ensuing loss of risk appetite, the Pound to US Dollar exchange rate slipped and USD/EUR recovered some of the losses the Dollar suffered yesterday.
Coming up today, the focus for USD investors is likely to be on the latest ADP employment figures, where an expected surge in US employment growth in September could help boost the US Dollar.
Canadian Dollar (CAD) Slips as Oil Prices Retreat
The Canadian Dollar (CAD) fell back on Tuesday, with the appeal of the oil-sensitive ‘Loonie’ weakening as WTI oil prices fell 1.5% back below $40 a barrel.
Australian Dollar (AUD) Dips in Risk-Off Trade
The Australian Dollar (AUD) ticked lower overnight on Tuesday, with investors shunning the risk-sensitive ‘Aussie’ after risk-sentiment was knocked by the US presidential debate.
New Zealand Dollar (NZD) Dented by Souring Market Mood
The New Zealand Dollar (NZD) also trended lower in overnight trade, with US political uncertainty and lingering coronavirus concerns weighing on the ‘Kiwi’.