Pound (GBP) Subdued amid Brexit and Covid Headwinds
The Pound (GBP) has traded within a narrow range today as the currency faces headwinds from fresh Covid-19 restrictions and Brexit.
The UK announced yesterday that it would be re-implementing the compulsory wearing of face masks in some public settings. Investors will be watching these moves closely should they signal more significant restrictions.
Sterling is also likely to see headwinds from ongoing negotiations between the UK and EU concerning the Northern Ireland Protocol.
Looking to the week ahead, Friday will bring the highest impact data for the UK. The country’s GDP growth for October is forecast to have risen by 0.3% in comparison to September’s 0.6%,
Euro (EUR) Slips as German Inflation Soars
The Euro has dipped today after German inflation soared to 5.2% in November, higher than 5% expected and up on October’s 4.5% reading.
Finalised Eurozone consumer confidence data also weighed on EUR sentiment after November’s declined was confirmed.
Meanwhile, economic sentiment in the bloc also fell in November.
Looking to the rest of the week, the Euro Area will report inflation figures for November. With the inflation rate forecast to rise from 4.1% to 4.5%, could the ECB be forced to reconsider its position?
US Dollar (USD) Rises as Treasury Yields Firm
The US Dollar (USD) has climbed at the start of the week as US Treasury yields recovered after sliding on Friday, bolstering the US Dollar.
Looking ahead, Federal Reserve Chair Jerome Powell will make a speech this evening regarding the central bank’s monetary policy. Investors have seen Powell has hawkish previously so will be watching the speech for any hints on the central bank’s forward guidance.
On Friday, the Non Farms Payrolls figures will be a key indicator of the country’s labour market, and if it rises as forecast then expect USD to strengthen further.
Canadian Dollar (CAD) Buoyed by Oil Price Rally
The oil-sensitive Canadian Dollar (CAD) regained ground at the start of the week as oil prices rallied. WTI crude rose to over $71 a barrel after Friday’s sharp selloff.
Unemployment rate figures and third quarter GDP figures for November are likely to be the main drivers of movement in CAD for the rest of the week.
GDP data between July and September may provide the ‘Loonie’ with some support as forecasts point to 0.5% growth.
Meanwhile, Canada’s unemployment rate is forecast to fall marginally from 6.7% to 6.6% as the Canadian labour market continues to recover.
Australian Dollar (AUD) Trends Upwards as Iron Ore Prices Jump
The Australian Dollar (AUD) has risen slightly against its competitors today, as the country saw ongoing economic recovery in November.
Private company profits for November rose by 4% above forecasts of 3% as they were boosted by increased orders. The ‘Aussie’ is also likely to have been boosted by a 10% jump in ore prices since Friday.
Looking ahead, Wednesday will bring the final reading for third quarter GDP growth. The growth rate is expected to fall -3%, which could place pressure on the dovish Reserve Bank of Australia (RBA) to raise interest rates ahead of schedule.