Pound Sterling

Weekly Update: Pound Rallies on Brexit Optimism as Vaccine Provides Fleeting Gains

Currency markets were again cheered by the news of a potential coronavirus vaccine this week, but this upbeat sentiment proved to be short-lived as some sobering coronavirus statistics brought things back into perspective.

However, the Pound was still pushed higher this week, supported by some cautious Brexit optimism amid hopes a UK-EU trade deal could be close.

Pound Infused with Volatility by Brexit Developments

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

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

The Pound traded in a wide range over the past week amidst some back and forth over the state of Brexit trade talks.

This resulted in Sterling briefly striking a new two-month high on suggestions a deal could be signed ‘early next week’, before trimming these gains as the EU’s decision to publish its no-deal Brexit plan tempered optimism.

Turning to next week’s session, the spotlight will undoubtedly remain on Brexit, with the Pound poised to surge if claims a deal will be ready prove true.

Euro Muted as Europe’s Coronavirus Woes Continue

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

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

The Euro struggled for direction this week as news of another potential coronavirus vaccine was offset by ongoing concerns over the realities of Europe’s current situation.

Another alarming rise in infections this week stoked further concerns over the damage being done to the Eurozone economy, something which was highlighted in a speech by European Central Bank (ECB) President Christine Lagarde.

Kicking off next week’s session is the publication of the Eurozone’s latest PMI releases, with the Euro likely to face some pressure as November’s preliminary figures are expected to report private sector growth contracted this month.

US Dollar Fluctuates Following Vaccine Announcement

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

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

The US Dollar initially fell back this week as markets welcomed the announcement of another potential coronavirus vaccine candidate from US biotech firm Moderna.

However, with coronavirus cases surging in the US and across Europe, market mood soon soured, reviving the ‘Greenback’s fortunes in the latter half of the week.

Looking ahead, the US Dollar may find itself back on top next week as growing alarm over the second wave of coronavirus infections, and ongoing uncertainty over the US presidential transition are likely to see investors favour the safe-haven currency.

Australian Dollar Rocked by Mixed Market Sentiment

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

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

The Australian Dollar initially got off to a solid start again this week, with the risk-sensitive currency rallying in response to more positive coronavirus vaccine news.

However, the ‘Aussie’ was unable to consolidate these gains, slipping back through the second half of the week as vaccine euphoria gave way to renewed coronavirus jitters.

Looking ahead, it’s likely we will see more volatility ahead for the Australian Dollar as coronavirus developments look set to continue dominating market sentiment.

Key Data

Nov 22 AUD Manufacturing PMI (Nov)

Nov 22 AUD Services PMI (Nov)

Nov 23 EUR Manufacturing PMI (Nov)

Nov 23 EUR Services PMI (Nov)

Nov 23 GBP Manufacturing PMI (Nov)

Nov 23 GBP Services PMI (Nov)

Nov 24 EUR German GDP (Q3)

Nov 25 USD GDP (Q3)

Nov 25 USD Durable Goods Orders (Oct)

Nov 25 USD Personal Spending (Oct)