Pound Undermined by Brexit Concerns, US Dollar Fluctuates on Fed Rate Hike Speculation

The Pound struggled to attract support this week as it was repeatedly undermined by Brexit developments which saw investors shrug off some positive UK data releases. 

At the same time, the US Dollar was bolstered by Federal Reserve rate speculation, before falling in tandem with US Treasury yields. 

Pound Rocked by Brexit Concerns 

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

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

The Pound found itself on the defensive for the majority of this week, with GBP investors largely shrugging off better-than-expected PMI releases amidst renewed Brexit uncertainty.  

Sterling also faced an additional setback at the end of the session amidst speculation the emergence of a new Covid variant could see deter the Bank of England (BoE) from hiking interest rates in December. 

Looking ahead, Sterling could find some limited support if the UK’s finalised PMIs print positively, but it’s likely that BoE rate speculation and Brexit developments will continue to act as the primary catalysts for the Pound next week. 

Euro Dented by Covid Concerns 

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

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

The Euro was pressured by Covid concerns throughout this week, with EUR investors fearing Germany could follow Austria in announcing a national lockdown.  

While some stronger-than-expected Eurozone PMI releases provided some support for the single currency, this was quickly undermined by a drop in German business morale, before the Euro was able to capitalise on a weaker US Dollar in the latter half of the week. 

The publication of the Eurozone’s consumer price index will be in the spotlight for EUR investors next week as they brace for another jump in inflation. 

US Dollar Fluctuates amidst Fed rate hike bets 

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

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

The US Dollar initially enjoyed some strong support this week, as the collapse of the Turkish Lira and renewed Covid concerns, saw investors favour the safe-haven currency.  

This uptick in the ‘Greenback’ was reinforced by some positive US data as well as the minutes from the Federal Reserve’s November policy meeting, as they indicated some policymakers may be open to accelerating the pace of monetary tightening. 

However a drop in US treasury yields and thin trading conditions due to Thanksgiving then saw the US Dollar relinquish some ground at the end of the week 

Centre stage next week will be the publication of the latest US non-farm payroll figures, as another robust print in November is likely to bolster Fed rate hike bets. 

Australian Dollar Sinks as New Covid Variant Saps Risk Appetite  

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

AUD/USD – Down once cent on the week’s opening levels 

The Australian Dollar trended broadly lower this week, as the appeal of the currency was undermined by a prevailing risk-off mood.  

This downtrend remained firmly in place through the latter half of the week, as the emergence of a worrying new Covid vaccine spooked markets and further dented the appeal of the ‘Aussie’. 

In focus for AUD investors next week will be the publication of Australia’s third quarter GDP report. Expect this to weaken the Australian Dollar as the lockdown measures in place at the time are likely to result in a sharp contraction of growth. 

Key Data  

Nov 29 EUR German Inflation Rate (Nov) 

Nov 30 EUR Inflation Rate (Nov) 

Dec 1 AUD GDP (Q3)  

Dec 1 GBP Manufacturing PMI (Nov)  

Dec 1 USD ISM Manufacturing PMI (Nov)  

Dec 2 AUD Trade Balance (Oct)  

Dec 2 AUD Retail Sales (Oct)  

Dec 3 GBP Services PMI (Nov)  

Dec 3 EUR Retail Sales (Oct) 

Dec 3 USD Non-Farm Payrolls (Nov) 

Dec 3 USD ISM Non-Manufacturing PMI (Nov)