Pound (GBP) Struggles after Brexit Deal Relief
The Pound (GBP) climbed sharply during the shortened Christmas Eve session in anticipation of the UK and EU announcing a long-awaited Brexit trade deal.
Sterling has since struggled as some analysts believe GBP Brexit gains have already been priced in and that large gaps regarding the service sector in the UK-EU trade deal remain, and concerns grow over another UK lockdown due to coronavirus cases soaring to levels seen earlier in the year.
Looking ahead, the UK parliament is set to follow the decision of EU ambassadors and approve the UK-EU Brexit trade deal tomorrow, which could support GBP exchange rates although the prospect of looming coronavirus restrictions may limit gains.
Euro (EUR) Benefits from Upbeat Mood
The Euro (EUR) also benefitted the UK and EU’s Brexit trade deal announcement on Thursday and the resulting upbeat trade.
However, EUR exchange rate gains were capped due to reports that the new coronavirus variant has been found in Europe.
Coronavirus developments will likely drive the Euro movement today as the mass vaccination rollout in the Europe continues, while a market rally could lend also lend support to the single currency.
US Dollar (USD) Slips amid Risk-On Trade
The US Dollar held firm going into the Christmas break following Donald Trump’s refusal to sign the US stimulus that had passed through US Congress, worrying investors and increasing safe-haven demand.
USD exchange rates have since dipped on increasing risk appetite as the improved stimulus bill returned and passed through the House of Representatives and moved to the Senate for a vote.
As global markets look set to rally, the US Dollar will likely weaken on a lack of safe-haven demand through today’s session, with risk-on trade dominating following the Brexit deal relief and hopes for the US stimulus package.
Canadian Dollar (CAD) Underpinned by Rising Oil Prices
The Canadian Dollar (CAD) ticked higher on Tuesday as oil prices rose amid stimulus optimism in the US, although the newly-discovered strain of coronavirus is capping optimism.
Australian Dollar (AUD) Rangebound Despite Increased Risk Appetite
The Australian Dollar (AUD) made modest gains overnight amid risk-on trade, although Australia’s support for the inquiry into China’s role in the Covid-19 pandemic is leaving AUD investors cautious due to rising tensions between the two closely trade-linked countries.
New Zealand Dollar (NZD) Strengthens on Market Optimism
The New Zealand Dollar climbed during the Asian session as increased risk appetite buoyed the risk-sensitive ‘Kiwi’.