Concerns over surging global coronavirus infections and stricter restrictions in Europe weighed heavily on market sentiment this week, spurring the US Dollar higher.
Meanwhile, the Pound faced further volatility this week in response to heightened Brexit uncertainty and new coronavirus restrictions in the UK.
Pound Fluctuates on Brexit Uncertainty
GBP/EUR – Unchanged on the week’s opening levels
GBP/USD – Down one cent on the week’s opening levels
The Pound has traded in a wide range again this week in response to heightened Brexit uncertainty ahead of a self-imposed deadline, which proved a little more flexible than previously feared.
Adding to the volatility was the announcement of a new tier system of coronavirus restrictions and elevation of London into the ‘high risk’ tier.
Looking ahead, Brexit and coronavirus concerns are likely to remain key catalysts for the Pound next week, with GBP investors also keeping a close eye on the UK’s latest inflation and PMI releases.
Euro Dented by Europe’s Coronavirus Woes
EUR/GBP – Unchanged on the week’s opening levels
EUR/USD – Down one cent on the week’s opening levels
The Euro was on the defensive this week as record spikes in coronavirus cases across the continent resulted in a raft of new restrictions being imposed throughout the Eurozone.
This in turn raised fresh questions over the bloc’s already fragile economic recovery, which is now in serious danger of contracting again in the last quarter of 2020.
In focus for EUR investors next week will be the Eurozone’s latest PMI figures, which could give way to significant weakness in the single currency if they reveal growth in the bloc’s private sector slumped this month.
US Dollar Turbocharged by Coronavirus Jitters
USD/GBP – Up one pence on the week’s opening levels
USD/EUR – Up one cent on the week’s opening levels
The US Dollar rallied this week as Europe’s coronavirus woes spooked investors, which catapulted USD higher on the back of significant safe-haven flows.
Further denting market risk appetite was fading hopes for a US stimulus deal before the US election, after the Democrats rejected Trump’s $1.8 trillion package.
Turning to next week’s session, with second wave concerns only growing and US political uncertainty rising ahead of next month’s presidential election, it’s likely we could see the US Dollar maintain its upward trajectory.
Australian Dollar Plunges in Risk-Off Trade
AUD/GBP – Down one pence on the week’s opening levels
AUD/USD – Down two cents on the week’s opening levels
The Australian Dollar nosedived this week, with investors shunning the risk-sensitive ‘Aussie’ amidst a clear risk-off tone.
Further denting AUD appeal were reports China had begun blocking Australian coal imports, as well as data showing a disappointing rise in domestic unemployment last month.
Turning to next week’s session, the focus for AUD investors will be on the minutes from the Reserve Bank of Australia’s (RBA) October policy meeting as they look for any evidence that more monetary easing is on its way.
Oct 19 AUD RBA Minutes
Oct 21 GBP Inflation Rate (Sep)
Oct 22 USD Initial Jobless Claims (17/Oct)
Oct 22 EUR Consumer Confidence (Oct)
Oct 22 AUD Manufacturing PMI (Oct)
Oct 22 AUD Services PMI (Oct)
Oct 23 EUR Manufacturing PMI (Oct)
Oct 23 EUR Services PMI (Oct)
Oct 23 GBP Manufacturing PMI (Oct)
Oct 23 GBP Services PMI (Oct)
Oct 23 USD Manufacturing PMI (Oct)
Oct 23 USD Services PMI (Oct)