Pound Rallies despite Record Jump in UK Redundancies

Australian Dollar (AUD) Fails to Hold Covid-19 Vaccine Optimism

The Australian Dollar (AUD) fell out of favour with investors as the initial wave of optimism over the Pfizer vaccine announcement began to ebb away.

As AUD exchange rates saw such sharp gains in the immediate wake of the news, this left the antipodean currency vulnerable to selling pressure on Tuesday. October’s NAB business confidence index seeing a surprise return to positive territory in October also failed to support the ‘Aussie’.

However, if the Westpac consumer confidence index also shows improvement on the month this could give AUD exchange rates a degree of support.

Pound (GBP) Shakes off Rise in UK Unemployment

The Pound (GBP) made gains against many of the majors overnight in spite of an uptick in the latest UK unemployment rate reading, which jumped from 4.5% to 4.8% and showed record levels of redundancy.

While signs point towards the government’s extension of its furlough scheme coming too little too late, the Pound remained on a positive footing, benefitting from the relative weakness of its retreating rivals.

Growing anticipation ahead of the upcoming third quarter UK gross domestic product report may see the Pound struggling to hold onto its uptrend for long, however.

Euro (EUR) Limited as Economic Sentiment Slump

The Euro (EUR) saw limited upside potential in the wake of weaker-than-expected Eurozone and German ZEW economic sentiment indexes.

Markets were disappointed as the German sentiment index slumped from 56.1 to 39 in November, reflecting a significant deterioration in sentiment within the Eurozone’s powerhouse economy, which left investors wary of the possibility of the Eurozone experiencing a double-dip recession.

As long as European Central Bank (ECB) policymakers maintain a cautious stance in their latest commentary, the mood towards the Euro is unlikely to improve in the near term.

US Dollar (USD) Steady as Markets Calm

The US Dollar (USD) found a degree of support as Monday’s surge in market risk appetite petered out, even though US political tensions remain.

After Monday’s surge in risk appetite following Pfizer’s vaccine announcement, markets calmed leaving the US Dollar slightly higher.

With fresh fiscal stimulus still looking like a distant prospect, however, anxiety over the health of the US economy could see a resurgence.

Canadian Dollar (CAD) Supported by Positive Oil Market

The Canadian Dollar (CAD) saw limited downside pressure overnight as oil prices remained in the green.

Even though the initial bout of market optimism over the Pfizer vaccine announcement faded, this was not enough to keep oil markets from pushing higher. With a fresh global oversupply glut looking less likely if the global economy can bounce back from the Covid-19 crisis in the first half of 2021, the mood of oil investors remained positive.

Nevertheless, CAD exchange rates still look vulnerable to any major shift in global market sentiment as Covid-19 is still on track to weigh on growth for some months to come.

New Zealand Dollar (NZD) Weakens Ahead of RBNZ Rate Decision

The New Zealand Dollar (NZD) softened as market hopes over the Pfizer vaccine failed to sustain themselves for long.

While investors remain encouraged by the prospect of a viable vaccine on the horizon, NZD exchange rates still came under selling pressure yesterday. Increasing anxiety ahead of the Reserve Bank of New Zealand (RBNZ) policy meeting also put a dampener on demand for the ‘Kiwi’.

If the RBNZ maintains a dovish outlook this morning, potentially leaving the door open for future policy action, support for the New Zealand Dollar could weaken further.

Data Releases

10:30 AUD Westpac Consumer Confidence Index (Nov) 108
12:00 NZD Reserve Bank of New Zealand Rate Decision 0.25

Louisa Heath