Pound (GBP) Buoyed by Brexit Optimism
The Pound (GBP) initially skyrocketed through yesterday’s trading session, as GBP investors seized on comments by European Commission President Ursula von der Leyen as she suggested she could see a ‘path to agreement’ on a Brexit trade deal.
However, Sterling gains were tempered through the latter half of the session after a Downing Street spokesperson suggested that no-deal remains the most likely outcome despite ‘some progress’ being made.
Coming up today, in addition to Brexit the focus for GBP investors is likely to be on the Bank of England’s (BoE) final policy decision of the year.
While no policy changes are expected from the BoE this month, the bank’s outlook for 2021 may offer some insight into the bank’s future policy plans, with some dovish forward guidance likely to weigh on the Pound.
Euro (EUR) Supported by Stronger-than-Expected PMI Releases
The Euro (EUR) ticked higher on Wednesday in response to the publication of some better-than-expected PMI figures from the Eurozone.
December’s preliminary releases reported that activity in both the manufacturing and service sectors beat expectations this month, leading to a far narrower-than-forecast contraction in private sector growth.
Looking ahead, the publication of the Eurozone’s latest consumer price index could put a dampener on the Euro today, as November’s finalised figures are likely to confirm that the bloc remained in a state of deflation.
US Dollar (USD) Slides as Fed Maintains Dovish Policy
The US Dollar (USD) hit two-and-a-half year lows following the Federal Reserve’s latest upgrade to growth forecasts.
Risk appetite increased as the Federal Reserve announced its plans to continue accommodative monetary policy until ‘substantial further progress has been made’, which weighed on safe-haven USD demand.
Also influencing the USD exchange rate was the publication of the latest US retail sales figures, where a larger-than-expected contraction in sales growth last month weakened the US Dollar through the European session.
In focus for USD investors today will be last week’s initial jobless claims. This could put some pressure on the US Dollar later this afternoon if another worrying rise in jobless claims stokes concerns over the state of the US labour market.
Canadian Dollar (CAD) Slips as Pull back in Oil Prices Offsets Upbeat Inflation
The Canadian Dollar (CAD) trended lower on Wednesday, as a modest pullback in oil prices dampened the appeal of the commodity-linked ‘Loonie’ and offset some stronger-than-expected domestic inflation figures.
Australian Dollar (AUD) Buoyed as Unemployment Rate Drops
The Australian Dollar (AUD) pushed higher overnight amid risk-on trade while the ‘Aussie’ received additonal support from an unexpected drop in the unemployment rate, which fell to 6.8% from 7%.
New Zealand Dollar (NZD) Gains on Strong GDP Rebound
The New Zealand Dollar (NZD) also made solid gains during the Asian session as stronger-than-expected GDP figures revealed the New Zealand economy rebounded by 14% in the third quarter, higher than the 13.5% forecast.