Australian Dollar Strengthens amid Wider Market Rally

Australian Dollar (AUD) Firms amid Market Rebound

The Australian Dollar (AUD) pared its losses on Tuesday as the risk-sensitive currency benefitted from a broader risk rally. This came amidst a rebound in equity markets fuelled by hopes for a massive new US stimulus package once Joe Biden is inaugurated next week.

Should this positive mood persist then we are likely to see the ‘Aussie’ extend its recovery through today’s session.

Pound (GBP) Soars as BoE’s Bailey Plays Down Negative Rates

The Pound (GBP) roared higher during yesterday’s trading session following comments from Bank of England (BoE) Governor Andrew Bailey regarding negative interest rates.

While Bailey warned that the UK economy is in a ‘very difficult period’, GBP investors seized on his apparent downplaying of negative interest rates as he suggested ‘there are a lot of issues’ with such a move.

Looking ahead, the focus for GBP investors is likely to be on UK coronavirus developments as any further surge in cases could see the government impose stricter coronavirus restrictions.

Euro (EUR) Slips as German Lockdown May Last into April

The Euro (EUR) was on the defensive on Tuesday following the news that Germany could remain in lockdown until April.

As the new more-infectious strain of the coronavirus from the UK spreads throughout the country, German chancellor Angela Merkel signalled that the current national lockdown is likely to be extended for another eight to ten weeks in order to prevent a 10-fold increase in infections.

Coming up this morning, the focus for EUR investors will be on a speech by European Central Bank President Christine Lagarde, whose potential comments on the Eurozone’s economic outlook are likely to offer some direction to the single currency.

US Dollar (USD) Slips amid Equity Rebound

A rally in equity markets saw the US Dollar (USD) retreat yesterday as investors reversed their positions in the safe-haven currency.

However, tempering the US Dollar’s losses was speculation that the Federal Reserve is looking to start winding down its currency stimulus programme as a growing number of policy makers express optimism about the post-pandemic economy.

Turning to today’s session the spotlight looks to be on the latest US consumer price index. As December’s figures are expected to report a modest improvement in inflation, will this push the Fed toward tapering its stimulus?

Canadian Dollar (CAD) Firms as Oil Prices Jump

The Canadian Dollar (CAD) ticked higher on Tuesday, with news that WTI crude prices had struck their highest levels since February at $53 a barrel helping to bolster the appeal of the oil-sensitive ‘Loonie’.

New Zealand Dollar (NZD) Bolstered by Risk-On Trade

The New Zealand Dollar (NZD) also strengthened through yesterday’s trading session as the appeal of the high-yield ‘Kiwi’ was bolstered by the prevailing risk-on sentiment and more optimistic tone in currency markets.

Data Releases

19:00 EUR ECB Lagarde Speech
20:00 EUR Industrial Production (Nov) 0.2%
23:30 USD Inflation Rate (Dec) 1.3%

Louisa Heath