GBP Extends Losses, UK Vaccine Concerns Dent Pound Euro Exchange Rate
GBP exchange rates extended this week’s losses yesterday, with the Pound Euro exchange rate weakening for the third consecutive session, falling from €1.17 at the start of the week to €1.15 today.
Concerns over disruption to the UK vaccination rollout caused by supply shortages and doubts over the AstraZeneca vaccine weighed on Sterling.
With the UK’s position under threat as the economy looking likely to recover first, as the EU and US vaccine rollouts surge, investors continued to shun the Pound.
Despite optimism over the UK lockdown easing on Monday, upside in the Pound appears limited again today in the absence of notable data releases and continued position correction as Sterling’s vaccine optimism gains continue being eroded.
Euro (EUR) Strengthens as EU Vaccination Drive to Hit Key Targets
After a slow start to yesterday’s session, Euro (EUR) gains gathered momentum as the US Dollar weakened following comments by Federal Reserve Chair Jerome Powell, which in turn supported the single currency due to the negative correlation in EUR/USD.
The EUR/USD exchange rate was able to push above $1.19, although it has since retreated today.
EUR exchange rates have also been strengthening on the improved economic recovery outlook in the EU after the European Commission told governments that the EU’s vaccination programme would hit key targets by the end of June.
The improved vaccine outlook has helped add to Euro Pound exchange rate gains, rising from £0.84 at the start of the week to £0.86.
Looking ahead, the single currency could come under some early pressure today after German Industrial production missed targets and recorded another negative reading of -1.6% in February, instead of returning to growth as forecast.
Meanwhile, while optimism surrounds the EU vaccine rollout, rising coronavirus cases across Europe and calls in Germany for a tougher lockdown could weigh on the Euro.
US Dollar (USD) Weakens on Fed Powell Comments
The US Dollar (USD) weakened during yesterday’s session after Fed Chair Powell’s confirmed the Federal Reserve’s dovish policy outlook, boosting risk appetite and weigh on safe-haven demand for USD.
Powell played down rising inflation concerns and reiterated that the Fed is nowhere near reducing its support for the US economy, especially as coronavirus cases rise and US jobless claims data released yesterday revealed a high-than-expected 744,000 rise last week, rather than the fall forecast.
Turning to today’s session, the US Dollar could recover some lost ground today after market sentiment has calmed and US Treasury yields have risen, boosting safe-haven demand for USD.
Canadian Dollar (CAD) Undermined by Softer Oil Prices
The oil-sensitive Canadian Dollar (CAD) has struggled as WTI crude prices remain subdued and hold below $60 a barrel.
Looking ahead, CAD exchange rates may receive support this afternoon as the Canadian unemployment rate is expected to have dropped to 8% in March, down from 8.2%.
Australian Dollar (AUD) Slips on Mixed Chinese Inflation Data
The Australian Dollar weakened overnight following mixed inflation data from China after the monthly consumer price index came in below forecasts on the month at -0.5%. On top of this, more cautious market trade has weighed on the risk-sensitive ‘Aussie’.
New Zealand Dollar (NZD) Lacks Support as USD Strengthens
In the absence of notable data releases, the New Zealand (NZD) slipped during the Asian session as a risk-off mood and rising US Treasury yields increasing US Dollar strength caused the ‘Kiwi’ to fall.
Data Releases
13:30 CAD Canadian Unemployment Rate (Mar)
13:30 USD PPI (Mar)