Pound US Dollar and Euro Rates Fluctuate as Lockdown Easing Hopes Dashed
GBP exchange rates initially roared higher on Thursday, with the Pound US Dollar exchange rate hitting a 32-month high, and GBP/EUR fleetingly hit €1.13.
The UK’s aggressive vaccine rollout programme drove gains by stoking economic optimism and hopes for a relatively swift reopening of the economy.
However, Sterling was forced to relinquish a portion of these gains later in the session after Boris Johnson suggested that it is still too early to discuss lifting the lockdown, while also refusing to rule out that it could be extended to the summer.
Sterling suffered another setback with the publication of the UK’s latest PMI figures this morning.
The PMIs showed a sharper-than-expected contraction in economic activity in January.
Although the manufacturing sector showed growth, it slowed significantly on the previous month. Meanwhile, the service sector reading tumbled to an eight-month low to indicate a worrying downturn.
Consequently, the Pound US Dollar and GBP/EUR exchange rates have both quickly lost 0.5%.
Euro Rallies on Mixed ECB Outlook
EUR exchange rates made some tentative gains yesterday in the wake of the European Central Bank’s (ECB) first policy meeting of 2021.
While EUR investors welcomed President Christine Lagarde’s positive tone regarding the outlook for the Eurozone economy, the upside in the single currency was tempered by Lagarde’s warning that the strength of the Euro is having a negative effect on inflation.
Turning to today’s session, EUR investors will be focused on the Eurozone’s own PMI figures, where a better-than expected print appears to have lent some support to the Euro despite the service sector remaining in contraction and showing weaker performance on the month.
US Dollar Slips as Upbeat Mood Remains in Place
The US Dollar spent much of Thursday on the defensive while investors continued to shun the safe-haven currency as the ‘Biden bounce’ helped to bolster market sentiment.
However, the ‘Greenback’ was able to rebound from its worst levels, after the mood soured slightly as the latest initial jobless claims revealed that new US unemployment claims remained worryingly high last week.
Looking ahead, the direction of USD exchange rates today is likely to remain largely tied to market sentiment, with the US Dollar potentially mounting a recovery amidst a gloomier mood.
Canadian Dollar Directionless as Oil Prices Flat
The Canadian Dollar traded sideways through yesterday’s trading session, as the commodity-linked ‘Loonie’ struggled to attract support while oil price movements remained mostly subdued.
Australian Dollar Sinks as Retail Sales Disappoint
The Australian Dollar tumbled overnight on Thursday, with the publication of some weaker-than-expected domestic retail sales figures as well as a souring of market sentiment both weighing on the ‘Aussie’.
New Zealand Dollar Stumbles despite Upbeat Inflation Figures
The New Zealand Dollar also fell victim to the fall in risk-appetite in overnight trade, with saw the ‘Kiwi’ unable to advance in spite of New Zealand’s 4th quarter CPI figures beating consensus estimates.