Pound to Euro Set to Slip as Brexit Deal Relief Fades

Pound (GBP) Gains on Brexit Deal Relief as Covid-19 Concerns Take Over

The Pound (GBP) climbed higher on Thursday on relief that the UK and EU both passed the Brexit trade agreement.

Sterling extended these gains following confirmation that UK markets could continue using EU trading platforms for up to the first three months of 2021 to avoid disruption, eliminating some of the uncertainty in the UK-EU trade agreement that still surrounds the financial sector.

However, GBP exchange rates could struggle today as the likelihood increases of tighter coronavirus in England.

The threat of a national lockdown may offset optimism from the first Oxford-AstraZeneca vaccine being given in the UK this morning and a slightly improved UK manufacturing PMI.

 

Euro (EUR) Recovers Losses Despite Threat of Coronavirus Restrictions

The Euro (EUR) experienced some losses at the end of 2020 under thin trading conditions and a pullback against the US Dollar following strong EUR/USD performance.

However, the single currency appears to have benefited from its negative correlation with weak USD exchange rates again, with EUR exchange rates recovering some losses so far at the start of the year.

Looking ahead, Euro gains could be limited today after a slight downward revision to the Eurozone’s December manufacturing PMI, as well as rising coronavirus infections and tightening restrictions in Europe, with Germany considering extending its hard lockdown.

 

US Dollar (USD) Selling Bias Continues

The US Dollar briefly stemmed its losses during 2021’s final trading session due to a slight correction in USD exchange rates and a drop in initial jobless claims, although the USD sell-off appears to have begun again today amid risk-on trade.

US stimulus negotiations on increased relief payments, from the $600 passed up to $2000, will likely drive additional volatility in the ‘Greenback’ after the Senate blocked the improved payment plan and talks continue.

The US stimulus block will make the upcoming Senate run-off elections in Georgia a greater focus for USD investors as a win for the Democrats would give them a majority and potentially pave the way for greater fiscal stimulus, possibly weighing on the US Dollar.

 

Canadian Dollar (CAD) Underpinned by Oil Prices Pickup

The Canadian Dollar (CAD) continues to benefit from rising crude oil prices as vaccine rollouts increase optimism for demand, and expectation OPEC will cap output both increased prices.

 

Australian Dollar (AUD) Gains Despite Weak Chinese Manufacturing Data

The Australian Dollar (AUD) strengthened in overnight due to risk-on market trade, which offset weak Chinese PMI manufacturing data that would usually weigh on the ‘Aussie’.

 

New Zealand Dollar (NZD) Edges Higher on Risk Appetite

The New Zealand Dollar also gained during the Asian session, benefitting from upbeat market trade and a broader USD sell-off.

Matthew Andrews

Contact Matthew Andrews


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