Pound Bolstered by Optimism over UK Covid-19 Vaccination Rollout

Australian Dollar (AUD) Rallies on Stronger Metal Prices

The Australian Dollar (AUD) pushed higher at the start of the week as base metal prices picked up once again, with the prices of both copper and iron strengthening on Monday.

As the rollout of Covid-19 vaccinations across the country commenced, the ‘Aussie’ gained further cause for confidence, with the move likely to speed up the pace of the economic recovery.

Even so, in the absence of any fresh Australian economic data releases, the Australian Dollar may struggle to hold onto a stronger footing for long.

Pound (GBP) Rises in Anticipation of UK Lockdown Exit Plan

The Pound (GBP) held onto a largely positive footing overnight as markets waited for the UK government to unveil its lockdown exit plan.

A sense of optimism over the possibility of tight lockdown restrictions seeing some loosening in the near future helped to shore up demand for the Pound.

The latest reports of the efficacy of both the Pfizer and AstraZeneca vaccines also gave GBP exchange rates a boost, with investors hopeful that the UK economic recovery may soon be underway.

However, with forecasts pointing towards December’s unemployment rate rising from 5% to 5.1%, confidence in the underlying health of the UK economy could weaken this evening.

Euro (EUR) Lifted as German Business Sentiment Indexes Strengthen

The Euro (EUR) found a measure of support thanks to a better-than-expected improvement in February’s German IFO business climate index, with the index strengthening from 90.3 to 92.4 this month.

With the corresponding expectations index also bettering forecast, worries over the outlook of the German economy diminished, to the benefit of the single currency.

Confirmation that the Eurozone inflation rate returned to positive territory on the year may keep EUR exchange rates on an uptrend.

US Dollar (USD) Struggles amid Risk-On Trade

The US Dollar (USD) struggled last night despite US Treasury yields nearing their recent one-year highs as market risk appetite improved.

With the general sense of market risk appetite heightened, the US Dollar lacked the support of safe-haven demand, leaving it on a weaker footing against its higher-yielding rivals.

A stronger consumer confidence index reading could put a floor under USD exchange rates tonight, though, as worries over the economic outlook diminish.

Canadian Dollar (CAD) Slips in Spite of Oil Market Strength

The Canadian Dollar (CAD) slumped overnight in spite of the latest rally in oil prices and forecasts of much larger gains to come.

Although Goldman Sachs raised its forecasts for rising oil prices, with Brent crude expected to hits its pre-Covid-19 levels by the end of July, this failed to shore up the commodity-correlated Canadian Dollar. With other risk-sensitive assets in higher demand, the room for CAD exchange rate gains proved limited, even as support for the US Dollar weakened.

Comments from Bank of Canada (BOC) Governor Tiff Macklem could put additional pressure on the Canadian Dollar.

New Zealand Dollar (NZD) Strengthens Ahead of Retail Sales Data

The New Zealand Dollar (NZD) picked up on Monday thanks to the general improvement in market sentiment.

A stronger sense of market optimism gave the ‘Kiwi’ a leg up against its rivals, even in the absence of any fresh domestic data releases. Anticipation ahead of the release of this morning’s fourth quarter retail sales data also failed to put a dampener on NZD exchange rates.

With forecasts pointing towards a sharp slowdown in retail sales growth, the mood towards the New Zealand Dollar may sour today.

Data Releases

08:45 NZD Retail Sales (Q4) 2.5%
18:00 GBP Unemployment Rate (Dec) 5.1%
21:00 EUR Eurozone Inflation Rate (Jan F) 0.9%
02:00 USD Consumer Confidence Index (Feb) 90

Louisa Heath