Pound to US Dollar Dented by Coronavirus Concerns, Before GBP Recovery Signs Today
The Pound to US Dollar ticked lower at the start of this week, although the GBP edged higher against EUR and more risk-sensitive countries amid risk-off trade.
Warnings the UK could face tougher coronavirus restrictions drove a loss of risk appetite and the Pound to US Dollar exchange rate lower.
Speaking on the Today programme, vaccines minister Nadhim Zahawi said that the government is reviewing the current restrictions amidst the continued rise in cases and the strain it is putting on the NHS.
Turning to today, after markets’ risk-off tone yesterday, the Pound to US Dollar is recovering as markets stabilise.
GBP exchange rates are also receiving support from from Bank of England (BoE) governor Andrew Bailey after he struck a cautious tone on negative interest rates. Speculation has increased recently that the BoE may need to ease monetary policy further as UK lockdowns look set to have caused a double-dip recession.
Euro (EUR) Stumbles amid USD Strength
The negative correlation in the Euro to US Dollar exchange rate saw the single currency fall back on Monday as jittery investors flocked to the ‘Greenback’.
On top of this, EUR investors expressed their concern over the current lockdown measures employed by many EU countries, amidst fears they could remain in place until the spring.
Meanwhile, in the absence of any notable data releases today, the Euro may struggle to regain its momentum from the end of 2020, particularly as Eurozone coronavirus cases continue to rise.
US Dollar (USD) Rallies as Market Mood Sours
The US Dollar opened this week’s session on the front foot, with investors flocking to the safe-haven currency amidst a sell-off in equity markets following a notable downturn in investor sentiment.
This souring of the market mood appeared to come from a mix of mounting global coronavirus cases, US political uncertainty and suggestions that the Federal Reserve is reluctant to commit to any additional monetary stimulus.
Coming up, market sentiment has calmed this morning, limiting USD exchange rates, with the US Dollar to Pound exchange rate falling sharply.
Canadian Dollar (CAD) Undermined by Fall in Oil Prices
The Canadian Dollar trended lower on Monday as the appeal of the commodity-linked ‘Loonie’ was dented by a 1% slump in oil prices.
Australian Dollar (AUD) Rebounds amid Cautious Optimism
After touching a two-month low against the US Dollar during Monday’s European session, the Australian Dollar mounted a recovery in overnight trade as improving market sentiment helped to prop up the risk-sensitive ‘Aussie’.
New Zealand Dollar (NZD) Buoyed by NZ Coronavirus Success
The New Zealand Dollar also trended higher again in overnight trade, with New Zealand’s success during the pandemic helping the ‘Kiwi’ to shrug off its recent losses.