News of a new potential coronavirus vaccine that shows nearly 95% effectiveness dominated headlines at the start of this week and acted as a key catalyst of movement in currency markets..
In light of this, the pound is mostly rangebound this morning, with GBP/EUR muted at €1.1134 and GBP/USD subdued at $1.3212. GBP/CAD is flat at C$1.7272, while GBP/AUD and GBP/NZD hold steady at AU$1.8067 and NZ$1.9176, respectively.
With the vaccine optimism already fading, the focus today is likely to be on the latest US retail sales figures, where a slump in sales growth last month may weigh on the US dollar.
Top of the agenda today will be the UK’s latest jobs report. Will a rise in unemployment weaken the pound or will the currency remain in a holding pattern ahead of this week’s Brexit deadline?
What’s been happening?
The US dollar was on the defensive at the start of this week’s session as demand for the safe-haven currency was knocked by the announcement of a new coronavirus vaccine.
US biotech firm Moderna claimed that its Covid-19 vaccine candidate has been 94.5% effective in phase 3 trials, which alongside news of its long shelf life helped to cheer markets to the detriment of USD.
The pound edged lower through yesterday’s session, amidst renewed fears over the state of Brexit talks, with investors growing increasingly doubtful that a UK-EU trade deal will be finalised before this week’s EU summit of leaders.
Adding to these concerns were also comments from Boris Johnson, who appeared to pre-emptively defend a no-deal Brexit by claiming the UK will ‘prosper’ even without a deal.
At the same time, coronavirus vaccine optimism and the accompanying upbeat sentiment helped to prop up the euro on Monday, which was otherwise pressured by ongoing concerns over surging coronavirus cases across Europe, as well as Poland and Hungary’s move to block approval of the EU’s latest budget, which included the €750bn recovery fund.
What’s coming up?
Looking ahead, the only data release of note today will be the latest US retail sales figures.
Economists forecast that sales growth will have slowed in October, potentially putting some pressure on the US dollar as it likely raises concerns over consumer demand in the run up to Christmas.
For GBP investors the spotlight is likely to remain on Brexit, where the ongoing impasse in trade talks is likely to limit any upside potential in the pound.
Finally, a speech by European Central Bank (ECB) President Christine Lagarde later this afternoon will be the main focus for EUR investors, and may offer some direction to the euro.
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