Pound (GBP) Rallies on Brexit Hopes
The Pound (GBP) skyrocketed on Monday, as investors were relieved to hear that the UK and EU had agreed to extend trade negotiations past Sunday’s deadline.
Sterling found further support from the EU’s chief negotiator, Michel Barnier, who keeps hopes of a deal alive after reportedly telling EU officials a ‘narrow path’ to an agreement is ‘visible’ despite concerns that ‘substantial gaps still need to be bridged’.
In addition to Brexit, GBP exchange rates may also be influenced by the UK’s latest jobs report today, with the Pound’s rally potentially being capped by a rise in unemployment in October.
Euro (EUR) Strengthens but Fresh Lockdowns Temper Gains
The Euro (EUR) struck higher through yesterday’s trading session, with Brexit optimism and the single currency’s negative correlation with the US Dollar (USD) helping to buoy EUR exchange rates.
However, these gains were capped somewhat by concerns over fresh lockdown measures in Germany and other European countries, and how this could impact the Eurozone economy during the vital holiday period.
In the absence of any notable EUR data releases today, movement in the Euro is likely to continue to be driven by market sentiment, with any positive Brexit developments likely to reflect well on the single currency.
US Dollar (USD) Dented by US Stimulus Optimism
The US Dollar started poorly this week as demand for the safe-haven currency was undermined by the prevailing risk-on tone.
This upbeat mood was attributed to Brexit optimism as well as hopes for another US stimulus package, amidst reports of positive progress towards passing a bipartisan agreement.
Coming up today, the publication of the latest US industrial production figures could leave the USD selling bias in place as economists predict factory output will have slowed in November.
Canadian Dollar (CAD) Firms amid Oil Rally
The Canadian Dollar (CAD) strengthened at the start of this week, as appeal of the oil-sensitive ‘Loonie’ was bolstered after WTI crude passed $47 a barrel, its best levels since the start of March.
Australian Dollar (AUD) Muted on Dovish RBA minutes
The Australian Dollar (AUD) struggled to find support overnight on Monday, after the minutes from the Reserve Bank of Australia’s (RBA) December meeting struck a dovish tone, with the RBA set to keep interest rates at record lows for at least three years.
New Zealand Dollar (NZD) Subdued on Mixed Chinese Data
The New Zealand Dollar (NZD) also found itself on the back foot in overnight trade, after some mixed Chinese data dampened the appeal of the risk-sensitive ‘Kiwi’.