Pound Subdued amidst Vaccine Row
The Pound struggled to find momentum at the end of last week amidst an escalating row between the EU and UK vaccine producer AstraZeneca, which weighed on the Pound to Euro exchange rate.
The EU sought to step up pressure on AstraZeneca to ‘deliver on its commitments’, pushing for the company to source vaccines from the UK to make up for shortfalls in its EU production centres, something which undermined confidence in UK vaccine supplies.
Looking to the week ahead, the main catalyst in the Pound looks to be the Bank of England’s (BoE) first policy meeting of 2021, where a relatively optimistic outlook from the bank could help to bolster GBP exchange rates.
GBP exchange rates are making solid gains so far this morning, with the Pound Euro exchange rate climbing back above €1.13. These gains come as the UK manufacturing PMI for January beat forecasts.
Euro Bolstered by German GDP Release
EUR exchange rates firmed at the end of last week, with the single currency garnering support from Germany’s GDP release.
The preliminary growth figures revealed Germany’s economy expanded by a very modest 0.1% in the fourth quarter of 2020. This beat expectations that growth would remain flat at 0%, and most crucially, points to Europe’s largest economy avoiding a double-dip recession.
In the spotlight for EUR investors in the first half of this week will be the preliminary Q4 GDP release of the entire Eurozone. Will Germany’s stronger-than-expected figures be reflected across the bloc?
US Dollar Relinquishes Gains as Market Mood Improves
The US Dollar initially rallied on Friday, with investors continuing to favour the safe-haven currency amidst some investor caution in regard to the retail-trade frenzy witnessed in the stock market in recent days.
However, investors began to reduce their positions in USD later in the session as the announcement of successful trials for two more coronavirus vaccines helped to reverse some of these risk-off flows.
Coming up today, the highlight for USD investors today will be on the latest ISM manufacturing PMI, where another robust expansion in the US factory sectors may help to cheer market sentiment, at the expense of the US Dollar.
Canadian Dollar Rallies as GDP Beats Expectations
The Canadian Dollar strengthened on Friday, with the ‘Loonie’ being carried higher by a stronger-than-expected GDP print in November as well as a rise in oil prices.
Australian Dollar Firms amid Improving Risk Sentiment
After stumbling at the end of last week’s session, the Australian Dollar saw some modest gains during today’s Asian trading session, courtesy of an improvement in market risk appetite.
Coming later tonight, the Reserve Bank of Australia (RBA) will conclude its February rate decision. Will a likely extension to the bank’s quantitative easing programme help to lift AUD exchange rates?
New Zealand Dollar Recovers in Risk-On Trade
The New Zealand Dollar also strengthened in overnight trade, recouping some initial losses in response to an improving market mood.