Pound (GBP) Hits 22-Month High Against Euro (EUR), US Dollar (USD) Soars Amid Expectations of Fed Rate Rise

Pound (GBP) Hits Highest Point Against Euro Since Feb 2020 

The Pound fell against its rivals this morning, but has since climbed to its highest point against the Euro since February 2020 by a risk-off trading mood. Further news that the UK government is to ease the country’s Covid-19 restrictions may have also provided a boost to Sterling. 

Reports indicate that Prime Minister Boris Johnson is hoping to reduce the UK’s isolation period from 7 days to 5. It’s hoped that the move will help ongoing staff shortages across the UK’s healthcare sector, with around 80,000 staff absences reported in the week leading to Jan 2. 

Looking to the week ahead for the Pound, a forecast rise to GDP could provide upward momentum to Sterling. This could be further be boosted by expectations of an early interest rate hike by the Bank of England (BoE). 

Euro (EUR) Drops as Despite Falling Unemployment 

The Euro (EUR) has fallen against many of its rivals today, hitting its lowest level against the Pound (GBP) since February 2020. The strong performance of the US Dollar is likely to have acted as headwind for the single currency today. 

Falling unemployment across the Eurozone could help boost the currency however, as the rate came close to reaching pre-pandemic levels. Analysts cited strong furlough scheme support as well as a rapid recovery in demand for the fall to 7.2%. 

The week ahead for the Euro could see the currency fall should Friday’s balance of trade figures indicate a drastic widening. Investors will also keenly be watching multiple speeches by European Central Bank (ECB) President Christine Lagarde for hints of a potential policy shift.  

US Dollar (USD) Climbs as Expectation of Early Rate Rise by Fed Grows 

The US Dollar (USD) has continued to be buoyed in the markets by expectations of an early interest rate rise by the US Federal Reserve, as well as a risk-off trading mood. USD’s upward movement may be limited by surging Covid-19 cases however. 

Investors may be holding off on more significant bets however as the Fed’s decision has caused havoc in the markets today. The currency could have also seen some headwinds today as talks between the US and Russia concerning a fresh invasion of Ukraine have so far been unproductive. 

Investors will be keenly await Tuesday’s testimony from Fed Chair Jerome Powell that may well outline the Fed’s sudden shift in policy last week. Inflation figures on Wednesday could also cause significant upward movement in the US Dollar, with analysts expecting a record high rate of 7%. 

Australian Dollar (AUD) Trends Sideways as Covid Infections Hit 1 Million 

The Australian Dollar has been remained rangebound against many of its rivals today, as a risk-on market mood earlier in the day has since evaporated. The ‘Aussie’ may also be facing headwinds from soaring Covid-19 cases across the country, as infections passed 1 million on Monday. 

Looking to this week for AUD,  an expected forecast fall in the country’s trade deficit could help push the currency upward.  

Canadian Dollar (CAD) Drops Amid Fluctuating Oil Prices 

The Canadian Dollar (CAD) has largely fallen against its rivals today, as the commodity-tied ‘Loonie’ was pulled down by falling oil prices. The commodity has fluctuated today amid fears of demand in the face of soaring global Covid-19 case numbers.  

With no significant data for CAD this week, the currency could continue to be affected by the volatile price of crude oil and market risk appetite as well as any Omicron related developments.