Pound Sterling

Weekly Update: Pound Swings amid Brexit Drama, USD Plunges to Multi-Year Lows

Trade in the Pound was extremely erratic over the past week, as heightened Brexit uncertainty rocked the currency.

At the same time, the US Dollar suffered a clear selling bias this week, with improving market sentiment plunging the safe-haven currency to new multi-year lows.

Pound Rocked by Brexit Drama

GBP/EUR – Unchanged on the week’s opening levels

GBP/USD – Up one cent on the week’s opening levels

The Pound has been infused with considerable volatility this week in response to ongoing Brexit drama.

This saw GBP exchange rates repeatedly rise and fall in knee-jerk reactions to often conflicting Brexit headlines as UK and EU trade talks entered the final straight.

Looking ahead, it’s clear that Brexit developments will continue to act as the main catalyst of movement in the Pound going forward, with Sterling poised to skyrocket should a deal be found.

Euro Soars to Two-Year High

EUR/GBP – Up one pence on the week’s opening levels

EUR/USD – Up two cents on the week’s opening levels

The Euro enjoyed strong support over the past week, with the EUR/USD exchange rate jumping to a two-year high as market sentiment was bolstered by coronavirus vaccine optimism.

This allowed the single currency to maintain an upward trajectory in spite of some lacklustre economic data.

Turning to next week’s session, the focus for EUR investors will no doubt be on the European Central Bank’s latest policy meeting, in which the bank is widely expected to announce an expansion to its monetary stimulus programme.

US Dollar Undermined by Stimulus and Vaccine Optimism

USD/GBP – Down one pence on the week’s opening levels

USD/EUR – Down one cent on the week’s opening levels

The US Dollar was on the defensive for much of this week as demand for the safe-haven currency was undermined by optimism surrounding the UK’s approval of the Pfizer coronavirus vaccine and hopes for a new US stimulus package.

Combined with some underwhelming data and concerns over spiking US coronavirus cases, this resulted in the US Dollar plummeting to new multi-year lows.

Coming up next week, the publication of the latest US CPI figures will be closely watched by USD investors, with the US Dollar potentially facing additional pressure if inflation weakened in November.

Australian Dollar Firms on Upbeat GDP Figures

AUD/GBP – Unchanged on the week’s opening levels

AUD/USD – Up one cent on the week’s opening levels

The Australian Dollar started poorly this week, retreating in response to flaring tensions between Australia and its largest trading partner, China.

However, the ‘Aussie’ mounted a convincing comeback through the latter half of the week, rallying on the back of stronger-than-expected GDP figures and improving market sentiment.

Looking ahead, the focus for AUD investors next week will be on Australia’s latest confidence data, with an improvement in business and consumer sentiment potentially giving another leg up to the ‘Aussie’.

Key Data

Dec 07 EUR German Industrial Production (Oct)

Dec 08 AUD Business Confidence (Nov)

Dec 08 AUD Consumer Confidence (Dec)

Dec 08 EUR Economic Sentiment (Dec)

Dec 10 AUD RBA Bulletin

Dec 10 GBP GDP (Oct)

Dec 10 GBP Trade Balance (Oct)

Dec 10 GBP Industrial Production (Oct)

Dec 10 EUR ECB Rate Decision

Dec 10 USD Initial Jobless Claims (05/Dec)

Dec 10 USD Inflation Rate (Nov)

Dec 11 USD Consumer Sentiment (Dec)