pound receeding

Weekly Update: Vaccine News Buoys Market Sentiment as Pound Stumbles from Highs

Yet another coronavirus vaccine announcement brought more cheer to the currency market this week, driving risk-sensitive currencies higher and leaving the US Dollar in the dust.

At the same time, the Pound retreated from a two-week high as the UK currency fell victim to fresh Brexit uncertainty.

Pound Slips from Two-Month High on Brexit Anxiety

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

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

The Pound initially roared higher this week as the news of positive results for the Oxford/AstraZeneca coronavirus vaccine, of which the UK government has pre-ordered 100 million doses, cheered GBP investors.

However, the Pound struggled to stabilise at its best levels, fluctuating through the remainder of the week in response to renewed Brexit uncertainty.

Brexit will likely continue to act as the main catalyst of movement in GBP exchange rates next week, potentially infusing volatility into Sterling if UK-EU trade talks remain deadlocked.

Euro Muted as Europe’s Coronavirus Woes Continue

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

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

The Euro struck higher over the past week, with the single currency’s negative correlation with the US Dollar allowing it to climb as the latter retreated.

The Euro accelerated despite some lacklustre data releases, with a larger-than-expected slump in the latest Eurozone PMI releases and a souring of Germany business morale, fuelling fears of a double-dip recession.

Turning to next week’s session, the focus for EUR investors looks to be on the Eurozone’s consumer price index, with the Euro set to fall if the bloc remained in a state of deflation in November.

US Dollar Undermined by Vaccine Optimism

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

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

The US Dollar spent most of this week on the back foot, as demand for the safe-haven currency was undermined by coronavirus vaccine optimism as well as the news that Donald Trump had finally allowed the transition to the Biden presidency to formally begin.

While the US Dollar made attempts to rally later in the week, these gains proved short-lived as a shortened US trading week resulted in thin-trading conditions in the ‘Greenback’.

Looking ahead, the publication of the latest US payrolls will be the main focus for USD investors next week, potentially dragging on the US Dollar if the pace of job creation slowed in November as expected.

Australian Dollar Gains in Upbeat Trade

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

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

The Australian Dollar trended higher this week, rallying as more coronavirus vaccine news and another ‘Biden bounce’ helped to bolster market sentiment.

However, the ‘Aussie’ did face some pressure in mid-week trade in response to some underwhelming domestic data.

Turning to next week’s session, the focus will be on Australia’s latest GDP figures, with AUD exchange rates poised to strengthen if growth in the third quarter beats expectations.

Key Data

Dec 01 GBP Manufacturing PMI (Nov)

Dec 01 EUR Inflation Rate (Nov)

Dec 01 USD ISM Manufacturing PMI (Nov)

Dec 02 AUD GDP (Q3)

Dec 03 AUD Trade Balance (Oct)

Dec 03 GBP Services PMI (Nov)

Dec 03 EUR Retail Sales (Oct)

Dec 03 USD ISM Non-Manufacturing PMI (Nov)

Dec 04 AUD Retail Sales (Oct)

Dec 04 EUR German Factory Orders (Oct)

Dec 04 GBP Construction PMI (Nov)

Dec 04 USD Non-farm Payrolls (Nov)