Daily Currency Update

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Uncertainty surrounds Powell’s testimony

USD - United States Dollar

Demand for the US dollar continued to fall this morning while GBPUSD swung over 1.41. Meanwhile Federal Reserve Chairman Jerome Powell provided his bi-annual address to Congress and markets have not chartered a response.

GBPUSD continued its upward trajectory after British Prime Minister Boris Johnson outlined a plan to reopen the economy. Johnson has adopted a cautious approach, with schools set to reopen on March 8, while non-essential shops and services are to remain closed until April, and indoor hospitality shuttered until May. Despite some of the restrictions likely to be in place until June, hopes the vaccine could drive a second half recovery have helped bolster GBP expectations.

Key Movers

So, there we have it. After several weeks of posturing with the media and even more weeks of falling infection rates Prime Minister Boris Johnson announced how England (and presumably the rest of the UK) would slowly and gradually exit from the current lockdown restrictions. With a frenzy of WhatsApp messages there has already been a surge of holiday bookings with EasyJet reporting a 630% increase in bookings to some locations across Europe. The pound has been the strongest G10 currency since the start of the year given the success of the vaccine rollout. This 'vaccination trade' assumes that the UK would then be the first to the party to ease restrictions. The conservative nature of Johnson's easing however may scupper this and the comparative advantage that the UK (and Sterling) has now may disappear.

The Australian dollar led gains through trade on Monday, finally breaching resistance at 0.78 US cents as reflation driven trade forced commodities and commodity currencies higher. Rates across treasuries surged with both Australian and NZ yields leading markets higher through the domestic session as investors chased higher returns, largely ignoring the RBA’s QE bond purchase announcement.

Expected Ranges

EUR/USD: 1.213 - 1.217 ▼

GBP/USD: 1.405 - 1.411 ▼

AUD/USD: 0.788 - 0.793 ▼

USD/CAD: 1.258 - 1.264 ▼