Home Daily Commentaries USD falls as risk appetite improves

USD falls as risk appetite improves

Daily Currency Update

GBP - British PoundFriday’s session was quiet globally with not much in the form of news after Thursdays’ Thanksgiving holiday in the US. Saying that, equity markets continued to rise as investor risk appetite remained high. Interestingly, the positive risk sentiment didn’t extend into currency markets, suggesting some cautiousness as Covid-19 cases persisted.The GBP was the worst performer on the day, falling 0.5% to 1.3310 against the USD. Without a clear catalyst, the sharp fall could be resultant of cautiousness from investors about Brexit negotiations as the year-end deadline nears.European Commission Chief Ursula von der Leyen said on Wednesday that "genuine progress" had been achieved but on Friday the UK Secretary of State, Dominic Raab, stated that important differences were keeping the two sides from a deal. The two sides have until December 11th and the EU council meeting of 2020, otherwise they will either need to extend the deadline or fall into a no deal. Looking ahead to this week, the outcome of face to face Brexit talks between the UK and European Chief negotiators, David Frost and Michel Barnier, will be closely watched. On the data front the main news comes in the form of EU Consumer Price Index (CPI) and retail sales on Tuesday and Thursday, plus Novembers US Non-Farm payrolls on Friday.

Key Movers

The positive risk sentiment in markets has continued into early trading this morning and has resulted in gains for the euro, Australian and New Zealand dollars, to name a few. This has been mainly due to improved Chinese manufacturing purchasing managers index figures for November. Both manufacturing and non-manufacturing surveys indicated that the sectors are expanding with reads of 52.1 and 56.4 respectively. Following the news, EUR/USD traded to a three-month high of 1.1983, AUD/USD jumped to its highest level since September, and NZD/USD rose to highs last seen in June 2018. As mentioned above, Brexit talks and Covid infection rates will continue to dominate market moves this week but investors will also be keeping a close eye on European CPI and retail sales ahead of Friday’s main data release in the form of US Non-Farm Payrolls.

Expected Ranges

  • GBP/USD: 1.3275 - 1.3375 ▲
  • GBP/EUR: 1.1075 - 1.1175 ▼
  • GBP/AUD: 1.80 - 1.81 ▲
  • GBP/NZD: 1.89 - 1.9050 ▲
  • GBP/CAD: 1.7250 - 1.74 ▼