GBP: GBPUSD looks like it wants more

EUR: Happy to relax a little

USD: Multiple factors helping USD weakening

Sterling

Sterling is keeping its head held high this morning as both vaccine news and Brexit positivity continue to combine to help UK investor sentiment.

GBPUSD tested a trend line yesterday at the 1.34 mark and was swiftly rejected but already looks like it wants to test it again today. A break and a close higher than 1.34 and some analysts will be looking for further gains in GBPUSD as high as 1.40. That seems a bit rich for us given the level of uncertainty around Brexit currently but the story is definitively one of dollar weakness more than sterling strength.

Preliminary retail sales data due this morning shouldn’t affect things much and we expect spending to recover in the coming months given the government’s announcement that retail will remain open in all tiers of the upcoming Covid-19 restrictions.

Euro

As we expected yesterday, EURUSD broke higher despite a pretty poor set of PMIs and we expect similar to happen today with German IFO business sentiment due at 9am GMT. Other than that the single currency seems happy to leave the volatility to the rest of the market.

US dollar

Dollar weakness looks set to continue today with individual stories coming together to prompt a further positive shift in investor sentiment.

We noted yesterday that we are at a point wherein Donald Trump’s various lawsuits to keep him in power are no longer a market factor and the confirmation yesterday from the US’s General Services Administration that agencies should begin to cooperate on the transition to the Biden Administration cemented that.

Biden’s expected appointment of Former Fed Chair Janet Yellen as President-Elect Biden’s Treasury Secretary is a smart move, and should allow closer ties between the Fed and the White House given Trump’s open criticism of the central bank during his tenure. Yellen is also in favour of further stimulus for the US economy and correspondingly expectations of further US government spending have increased.

Elsewhere

NZD has shifted higher after the NZ Finance Minister floated an idea that the Reserve Bank of New Zealand should amend its remit to include ensuring a stable housing market. Such a comment prompted some in the investment community to cut their bets on further interest rate cuts by the NZ central bank in the future but we expect this impetus to fall away in the coming sessions; all central banks will include the housing market in their discussions on monetary policy.

Have a great day.