Pound (GBP) Mixed as Exports Fall and UK-EU Tensions Rise
The Pound (GBP) fluctuated at the start of the week as vaccine developments and unresolved Brexit issues drove movement.
While the UK’s impressive vaccine rollout continues with over 12 million people inoculated, nearly one in four adults, uncertainty hangs over the AstraZeneca vaccine’s effectiveness against the South African variant of coronavirus now found in the UK.
At the same time, lasting Brexit uncertainty weighed on the Pound as concerns rise following reports of a 68% drop in exports to the EU, and tensions rise over the Northern Ireland Protocol with the EU, with Cabinet Minister Michael Gove commenting that ‘refinements’ are needed.
Looking ahead, further news on the vaccine situation will continue causing GBP movement as continued positive progress could bring about the lifting of lockdown measures, supporting Sterling.
Euro (EUR) Holds but Vaccine Concerns Persist
The Euro (EUR) held its ground during yesterday’s session despite weaker-than-expected German industrial production figures that revealed activity stalled in December.
EUR exchange rates received some support due to the negative correlation in the EUR/USD pairing, with the US Dollar weakening due to increased risk appetite.
The single currency looks to stay underpinned by USD weakness at the start of today’s session, although the EU’s slow vaccine rollout could cap gains despite news that the bloc has secured an order for 300 million more Pfizer vaccines.
US Dollar (USD) Slips in Risk-On Trade as Stimulus Drives Optimism
The US Dollar (USD) moved in line with US Treasury yields through Monday’s session, with USD exchange rates slipping as Treasury yields retreated slightly from their 11-month highs.
Pressure was added to the US Dollar as a risk-on mood swept through US equity markets, which offset any support from high yields and weighed on safe-haven demand for the ‘Greenback’.
The catalyst for the rise in yields and increased risk appetite appears attributed to expectation for rising inflation, which is being driven by the $1.9 trillion US stimulus package that is progressing through US Congress.
Turning to today’s session, market sentiment and Treasury yields will continue driving USD exchange rates ahead of Wednesday’s inflation figures.
Canadian Dollar (CAD) Underpinned by Rising Oil Prices
The Canadian Dollar (CAD) was steady at the start of the week as WTI crude continued rising, hitting $58 a barrel.
Australian Dollar (AUD) Buoyed by Risk-On Mood
The Australian Dollar (AUD) moved higher overnight, driven by the risk-on market mood and a rise in business confidence indicated by the National Australia Bank’s (NAB) index.
New Zealand Dollar (NZD) Hits Month High against US Dollar
The New Zealand Dollar (NZD) also ticked higher overnight as the ‘Kiwi’ benefitted from improving market sentiment.