Pound (GBP) Stumbles as New Strain of Coronavirus Dominates Headlines
After struggling towards the end of last week in the face of fading optimism that the UK and EU would reach a trade agreement the Pound opens this week on the back foot.
Sterling has recorded notable losses against currencies like the Euro and US Dollar in the face of rising concerns surrounding a new, more transmittable strain of the Coronavirus.
Many parts of England, including London, have now been put under tier four restrictions while European nations like France have banned travel from the UK.
While Brexit talks have been extended past Sunday’s deadline, the likelihood of the UK leaving the EU without a trade deal is also weighing on GBP.
Euro (EUR) Fails to Benefit from Rising German Business Sentiment
Friday’s German IFO business sentiment survey proved more optimistic than anticipated, with the headline business climate index for December picking up unexpectedly from 90.9 to 92.1.
However, the Euro was unmoved by the better-than-expected data.
Investors will now be looking to today’s Flash Eurozone Consumer Confidence Index. The Euro could find some support if sentiment improved in December.
US Dollar (USD) Recovers Ground as Risk Appetite Sours
The US Dollar (USD) gained renewed traction during Friday’s European session as market sentiment widely soured.
Growing doubts over the likelihood of an imminent fiscal stimulus package agreement, uncertainty surrounding Brexit and concern about the new strain of Covid all helped to fuel safe-haven demand.
Today’s only notable US data, the Chicago Fed National Activity Index, could become another cause for concern if it shows declining activity.
However, demand for higher risk currencies could return later in the week if the US stimulus package is finally approved.
Canadian Dollar (CAD) Under Pressure despite Retail Sales Data
The Canadian Dollar (CAD) failed to benefit from a smaller-than-expected loss of momentum in October retail sales growth.
Sales growth came in at 0.4% on the month, better than the 0.2% forecast, but this was still down from September’s sales figures.
Rising oil prices also did little to inspire CAD gains, but a positive showing from today’s Canadian New Housing Price Index could give the ‘Loonie’ a little boost.
Australian Dollar (AUD) Softens as Investors Turn from Risk
The Australian Dollar (AUD) returned to the back foot on Friday as market risk appetite faded in the face of increasing no-deal Brexit fears.
As US politicians also appeared likely to miss their deadline for the agreement of a fresh fiscal stimulus package, investors piled out of risk-sensitive assets. With doubts over the global economic outlook rising the ‘Aussie’ struggled to find any particular support.
New Zealand Dollar (NZD) Unmoved by Trade Surplus Surprise
The New Zealand Dollar (NZD) fell out of favour with investors even as November’s balance of trade unexpectedly returned to a state of surplus.
While signs point towards a stronger performance from the New Zealand economy in the fourth quarter, NZD exchange rates still shed ground during trading on Friday. Support for the ‘Kiwi’ weakened as market risk appetite soured in response to Brexit anxiety and the lack of progress towards a US fiscal stimulus package agreement.