Pound (GBP) Rocked by Brexit Uncertainty
The Pound to Euro and GBP/USD fluctuated at the end of last week’s session in response to a flurry of Brexit headlines on whether or not trade talks will continue.
GBP exchange rates fell following Prime Minister Boris Johnson’s comments that the UK should prepare for an Australia-style trade deal, and a spokesperson suggesting talks should end.
However, the Pound recovered its day losses as EU officials appeared to confirm talks will continue, which the UK and EU negotiators will discuss today and the structure they should follow.
This left the Pound to Euro exchange rate near its levels at the start of the day, and GBP/USD slightly higher as a risk-on mood weigh on the US Dollar.
Looking to the week ahead, with Brexit still in the spotlight and speculation of a second UK lockdown in the headlines, it seems safe to assume we will see the Pound infused with additional volatility.
Euro (EUR) Rebounds in Upbeat Trade
The Euro (EUR) edged higher on Friday, with an improving market mood offering the single currency enough support to find some gains against its main rival the US Dollar (USD)
However, this upside in the Euro proved limited as EUR investors remained skittish in light of Europe’s unrelenting rise in coronavirus cases, which is overloading many governments’ tracing systems.
We expect these coronavirus concerns to continue to act as a key catalyst for EUR exchange rates this week, particularly as more countries edge towards another total lockdown.
US Dollar (USD) Dented by Vaccine Hopes
The US Dollar (USD) was on the back foot at the end of last week as news that US pharmaceutical giant Pfizer may apply for authorization of a coronavirus vaccine next month dented safe-haven demand.
Tempering these losses, however, was the latest US retail sales figures, which surprised to the upside in September, with sales growth expanding at its fastest pace since June.
Turning to this week’s session, we could see the US Dollar back in the driving seat this week if more coronavirus restrictions see the market mood start to sour again.
Canadian Dollar (CAD) Subdued as Oil Recovery Falters
The Canadian Dollar (CAD) was mostly rangebound on Friday, as the appeal of the commodity-linked ‘Loonie’ was dented after a sudden reversal in oil prices, following a brief rally.
Australian Dollar (AUD) Gains on Optimistic Chinese Growth
The Australian Dollar (AUD) strengthened overnight as China’s GDP figures suggested its economic recovery continues to gather steam, in turn boosting the trade and risk-sensitive ‘Aussie’.
This offset more dovish signals from the Reserve Bank of Australia’s (RBA) latest meeting as expectation rises of an interest rate cut at November’s meeting.
New Zealand Dollar (NZD) Edges Higher Following Ardern Election Win
The New Zealand Dollar (NZD) also edged higher on China’s upbeat economic data, while Jacinda Ardern’s comprehensive election win also supported NZD exchange rates.