Pound to US Dollar Retreats from Two-Year High as UK Enters Lockdown

Pound (GBP) Stumbles on Coronavirus Fears

The Pound (GBP) got off to a poor start in 2021, with the Pound to US Dollar exchange rate retreating from two-year highs back below $1.36.

Sterling’s decline came in response to growing concerns over the surge in UK coronavirus cases.

This culminated in Boris Johnson announcing another national lockdown in England yesterday evening, much to the dismay of markets.

In the absence of any notable UK data releases today, the focus for GBP investors will undoubtedly remain on coronavirus developments, with the Pound vulnerable to additional losses amidst concerns over how another lockdown could impact the UK’s economy.

 

Euro (EUR) Strengthens despite Extension of German Lockdown

The Euro (EUR) struck higher on Monday, with the single currency propelled higher thanks to its negative correlation with the US Dollar (USD).

This upside in the Euro came in spite of Germany announcing an extension to its national lockdown and the Eurozone’s finalised manufacturing PMI figures printing below expectations in December.

Turning to today’s session, the publication of Germany’s latest jobs report looks to be the key focus for EUR investors, with a potential improvement in employment growth last month helping to extend the bullish tone towards the Euro.

 

US Dollar (USD) Undermined by New Year Positivity

The US Dollar fell back yesterday, with the positive market mood at the start of the new year extending the ‘Greenback’s bearish run.

Also weighing on the appeal of the US Dollar was optimism that Democrats could win both seats in Georgia’s Senate runoffs, handing the Biden administration a slim majority in Congress and paving the way for more US fiscal stimulus.

In addition to today’s Senate runoffs, the focus for USD investors will be on the latest ISM manufacturing PMI.

This could keep the pressure on the US Dollar if domestic factory activity slowed in December as expected.

 

Canadian Dollar (CAD) Buoyed by Rising Oil Prices

The Canadian Dollar (CAD) ticked higher on Monday, as the appeal of the commodity-linked ‘Loonie’ was bolstered by an uptick in oil prices despite some concerns over the seizure of a South Korean oil tanker by Iran.

 

Australian Dollar (AUD) Rebounds on Positive Vaccine News

After weakening late on Monday, the Australian Dollar (AUD) was able to stage a comeback overnight after the FDA announced that the two coronavirus vaccines currently approved for use in the US have shown 95% effectiveness.

 

New Zealand Dollar (NZD) Buoyed by Rebound in Risk Appetite

The New Zealand Dollar (NZD) also struck higher in overnight trade, with the risk-sensitive ‘Kiwi’ recouping some of Monday’s losses as the market mood began to improve once more.

Matthew Andrews

Contact Matthew Andrews


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