Pound Sterling

Weekly Update: Vaccine Optimism Cheers Markets, US Political Uncertainty Continues

The tone in the currency market was notably upbeat at the start of this week as the ‘Biden bounce’ and news of a potential coronavirus vaccine cheered investors.

However, the risk-on mood began to sour by the second half of the session as record surges in US and European coronavirus cases as well as lingering fears over Trump’s refusal to concede the US election weighed on markets.

Pound Temporarily Buoyed by Coronavirus Vaccine Optimism

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

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

The Pound initially struck higher this week, its gains being mostly driven by positive news of a possible coronavirus vaccine on hopes that as the major economy worst hit by the coronavirus, it will also benefit most from a vaccine.

However, Sterling sentiment then soured in the latter half of the week as a result of renewed Brexit jitters and a weaker-than-expected rebound in third quarter GDP.

Coming up next week the spotlight will be on Brexit, amidst hopes the UK and EU could finally reach a trade agreement before the next EU summit, with the Pound poised to surge if a deal can be found.

Euro Undermined as Europe’s Coronavirus Situation Deteriorates

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

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

The Euro fell back against most of its currency peers over the past week as surging coronavirus cases throughout Europe and the threat of new lockdown measures in Italy weighed on the single currency.

This gloomy mood was reflected in the latest ZEW surveys which revealed economic sentiment in the Eurozone plunged to a six-month low this month.

Turning to next week’s session, it’s likely the Euro could remain under pressure should coronavirus cases continue to surge and the Eurozone’s latest CPI figures confirm the bloc remained in a state of deflation last month.

US Dollar Buoyed by Trump’s Refusal to Concede

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 traders were cheered by the news that Joe Biden had claimed victory in the US presidential election as well as the announcement of a potential coronavirus vaccine.

The second half of the week was then dominated by US political concerns as Trump’s staunch refusal to concede the election unnerved markets and bolstered the safe-haven US Dollar.

Looking ahead, US political developments will remain a key concern for USD investors, amid the threat of a messy transition period, while the release of the latest US retail sales figures is also likely to influence the US Dollar.

Australian Dollar Fluctuates in Mixed Trade

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

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

The Australian Dollar initially started well this week, bolstered by the ‘Biden bounce’ in equity markets and hopes for a coronavirus vaccine.

However, the ‘Aussie’ then faced some headwinds through the latter half of the week in response to some lacklustre Chinese inflation figures and renewed US political uncertainty.

Looking ahead, the focus for AUD investors next week will likely be on Australia’s latest jobs report, where another bump in the unemployment rate could put more pressure on the Australian Dollar.

Key Data

Nov 17 AUD RBA Minutes

Nov 17 USD Retail Sales (Oct)

Nov 17 USD Industrial Production (Oct)

Nov 18 GBP Inflation Rate (Oct)

Nov 18 EUR Inflation Rate (Oct)

Nov 19 AUD Unemployment Rate (Oct)

Nov 19 USD Initial Jobless Claims (14/Nov)

Nov 19 GBP EU Summit on Brexit

Nov 20 AUD Retail Sales (Oct)

Nov 20 GBP Retail Sales (Oct)

Nov 20 EUR Consumer Confidence (Nov)