Pound to US Dollar Skyrockets on Brexit Hopes, GBP/EUR at Six-Week High
The Pound (GBP) roared higher through Wednesday’s trading session amid renewed Brexit optimism after the EU’s chief negotiator Michel Barnier told the European Parliament that a deal is ‘within reach’.
This sent GBP exchange rates soaring, with the Pound to US Dollar gaining two cents past a key resistance level, while the GBP/EUR exchange rate hit a six-week high.
GBP investors also cheered Barnier’s attempts to entice Boris Johnson back to the negotiation table by stating that the EU is ‘ready to discuss all subjects on basis of legal text’, something the PM said earlier in the week would be necessary for talks to continue.
Turning to today’s session, we could see Brexit take a temporary backseat this morning as the spotlight is on a speech by Andrew Bailey. Will the UK’s recent coronavirus woes prompt a more dovish outlook from the Bank of England (BoE) Governor?
Sterling has started the day holding slipping slightly as the Pound to US Dollar has dipped below $1.31 at the time of writing, while GBP/EUR is steady.
Euro (EUR) Rise Continues to Defy Coronavirus Concerns
The Euro (EUR) struck higher again yesterday, with the single currency continuing to capitalise on the US Dollar’s (USD) weakness thanks to the negative correlation in the pairing.
This kept the Euro US Dollar exchange rate holding in the region of $1.18, but EUR/GBP fell sharply due to the Pound’s rally on Brexit optimism.
The continued acceleration in EUR exchange rates comes in spite of growing concern over Europe’s coronavirus resurgence and how the increasingly strict restrictions being imposed by countries could impact the Eurozone’s economic recovery.
In the spotlight for EUR investors today will be the Eurozone’s latest consumer confidence figures. Will Europe’s coronavirus resurgence have prompted a souring of household sentiment this month?
US Dollar (USD) Undermined by US Stimulus Optimism
The US Dollar (USD) remained subdued in mid-week trade, with ongoing US stimulus optimism knocking the ‘Greenback’s safe-haven appeal.
As a result, USD is weak versus the Euro, while Pound strength sent USD/GBP tumbling to a six-week low.
This comes amidst reports of positive progress towards drafting a bill, with the hopes of a comprehensive deal being agreed before the US presidential election electrifying market sentiment in recent days.
Looking ahead, the US Dollar could face some headwinds later in today’s session if last week’s US jobless claims reports another notable rise in unemployment claims.
Canadian Dollar (CAD) Slips on Mixed Economic Data
The Canadian Dollar (CAD) fell back yesterday as a rebound in headline inflation in September was unable to offset weaker-than-expected domestic retail sales figures in August.
Australian Dollar (AUD) Gains Tempered by RBA Speculation
The Australian Dollar (AUD) roared higher through Wednesday’s European session, but struggled to carry this momentum into overnight trade as renewed expectation that the Reserve Bank of Australia (RBA) will ease monetary policy next month saw the ‘Aussie’ pare some of its gains.
New Zealand Dollar (NZD) Dented by New Coronavirus Cases
The New Zealand Dollar (NZD) also retreated from its best levels overnight, with markets expressing concern over reports of new domestic coronavirus cases.
In the spotlight for NZD investors at the end of this week’s session will be the publication of New Zealand’s quarterly CPI report. Will a rebound in inflation in the third quarter offer support to the ‘Kiwi’ in overnight trade?