Pound (GBP) Falls against Euro as UK ‘believe no basis to resume talks’
GBP exchange rates edged higher across the board at the start of yesterday, which included a jump of a cent in the Pound to US Dollar.
These gains were on hopes that Brexit trade talks will continue following discussions between the UK and EU negotiators, pushing the Pound to Euro higher as well.
This resulted in the EU’s chief negotiator, Michel Barnier, saying the EU is willing to intensify trade deal talks to break the deadlock, which UK Cabinet Office Minister Michael Gove welcomed, commenting the ‘door was not closed’.
However, the Pound to Euro fell at the end of the day as Downing Street said the UK ‘believes there is no basis to resume talks’.
The Pound will remain sensitive to trade talks uncertainty and further coronavirus restrictions today, although a series of speeches from Bank of England (BoE) policymakers could provide insight into the BoE’s future policy, potentially driving some GBP movement.
Euro (EUR) Lifted by USD Weakness
The Euro (EUR) strengthened through yesterday’s session as improving market sentiment weighed on the US Dollar, boosting EUR/USD to a week high due to its negative correlation with the US Dollar.
A better-than-expected Eurozone construction output reading gave the Euro limited support, despite being a negative reading, but it was USD weakness that offset concerns over the deteriorating coronavirus situation in the Eurozone that led to EUR gains.
Meanwhile, it is the concerns over surging coronavirus cases and more restrictions coming into force across Europe, threatening the Eurozone’s recovery that will likely drive EUR movement today, as well as USD strength.
US Dollar (USD) Slips on Improving Market Sentiment ahead of Stimulus Deadline
The US Dollar (USD) fell yesterday as market sentiment lifted on global economic rebound hopes stemming from positive China GDP figures and coronavirus vaccine optimism.
Although China’s GDP came in below expectations, news that the world’s first big economy is recovering and that a vaccine may be available by the end of the year boosted risk appetite early in the day, weighing on the US Dollar.
However, market optimism could fade as today’s deadline put forward by House Speaker Nancy Pelosi to reach a deal on US stimulus remains uncertain. This in turn could reduce risk appetite and support safe-haven demand for the US Dollar.
Canadian Dollar (CAD) Limited on Oil Production Uncertainty
The Canadian Dollar (CAD) struggled during yesterday’s session as oil price uncertainty over possible OPEC+ production increases limited CAD exchange rates.
Australian Dollar (AUD) Weakens on RBA’s Kent Comments
The Australian Dollar (AUD) dropped in overnight trade following a speech from Reserve Bank of Australia (RBA) assistant governor Christopher Kent, in which he confirmed room for monetary policy easing.
New Zealand Dollar (NZD) Drops on Dovish RBNZ
The New Zealand Dollar (NZD) also fell after dovish comments from Reserve Bank of New Zealand Governor Adrian Orr, as well as a drop in market sentiment.