Pound (GBP) Stumbles as PM Warns UK Will ‘Feel Effects’ of Europe’s Third Wave
The Pound got off to a poor start this week, retreating after Boris Johnson warned that Europe’s third wave of coronavirus infections will ‘wash up on our shores’.
Alongside concerns over possible vaccine shortages, this stoked fears the government’s reopening plans could be derailed and sapped Sterling sentiment on Monday.
Meanwhile, the Pound may find some support today, after data published earlier this morning revealed a surprise drop in unemployment in January.
Euro (EUR) Buoyed by USD Weakness
The Euro firmed on Monday, as the single currency’s negative correlation with the US Dollar allowed it to strengthen as the latter fell.
Limiting the Euro’s gains, however, were growing fears over Europe’s coronavirus resurgence, which prompted a warning from European Central Bank (ECB) President Christine Lagarde that the near-term outlook in the Eurozone is uncertain.
In the absence of any notable Eurozone data releases today, the focus for EUR investors is likely to remain on European coronavirus developments, with the Euro likely to face an uphill battle if the situation continues to deteriorate.
US Dollar (USD) Undermined by Drop in Yields
The US Dollar ticked lower through yesterday’s European trading session as the currency was undermined by a pullback in US Treasury yields.
However, the ‘Greenback’s losses remained modest amidst a prevailing risk-off mood, driven by European coronavirus concerns and the collapse of the Turkish Lira (TRY).
Coming up, the focus for USD investors today will be on the start of Federal Reserve Chair Jerome Powell’s two-day testimony in front of Congress, which could send the US Dollar higher if he continues to dismiss concerns over the recent surge in yields.
Canadian Dollar (CAD) Dented by Weak Oil Prices
The Canadian Dollar struggled to attract any support on Monday, as the appeal of the commodity-linked ‘Loonie’ was knocked by weak oil prices and concerns over Canada’s vaccine rollout.
Australian Dollar (AUD) Slumps as China Targeted by Sanctions from the West
The Australian Dollar retreated overnight on Monday, as the China proxy ‘Aussie’ was undermined by the news that the US, Canada, UK and EU will impose sanctions on Chinese officials over human rights violations in Xinjiang.
New Zealand Dollar (NZD) Weakens in Skittish Trade
The New Zealand Dollar also stumbled overnight as fears over fresh tensions between the West and China and the threat of new lockdowns in Europe unnerved traders and dampened market risk appetite.
Data Releases
07:00 GBP Unemployment Rate (Jan)
07:00 GBP Wage Growth (Jan)
16:00 USD Fed Powell Testimony