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GBP/USD hits three-year highs, safe-haven popularity increases

Sterling trades at three-year highs

The Pound's been attempting to push higher against the US Dollar after reaching three-year highs in recent sessions but has been unable to breach the 1.3750 interbank level. The news regarding the pace of the vaccine rollout boosted Sterling sentiment slightly, as well as comments from the Bank of England playing down the prospect of negative interest rates. Sterling activity could be choppy in the week ahead, with the Bank of England expected to give some further guidance on negative interest rates.  

Attempts to soften the Euro

The Euro softened last week after a member of the European Central Bank suggested that interest rate cuts could occur to quell the currency's recent buoyancy. Meanwhile, better-than-forecast economic data emerged from Germany, France, and Spain, some of the Eurozone's largest economies as the currency bloc adapts to coronavirus restrictions. However, central bankers warned that the data could be an anomaly. In the week ahead, growth and inflation data will be released, which could be influential for the common currency. 

Sought-after safe-havens

The US Dollar enjoyed a boost towards the end of last week—after an already positive January—as a stock market rout increased safe-haven demand. The Federal Reserve made it's latest monetary policy announcement, choosing to keep rates unchanged in line with expectations. However, policymakers raised some flags regarding the speed of the economic recovery. In the week ahead, the highly-influential Non-Farm Payrolls data will be out, as well as significant manufacturing numbers which could all influence Dollar movement. 

Risk appetite ebbs

Both the Aussie and New Zealand Dollar softened last week. The Trans-Tasman currencies fell against the safe-haven US Dollar, signalling a decline in risk appetite; the two currencies are often used to indicate risk sentiment levels. Last week, data showed a fall in Australian business confidence in December, following steady increases in the second half of the year. The tumble has been attributed to a coronavirus outbreak in Sydney which resulted in a lockdown. Inflation numbers also fell but managed to beat forecasts. The disappointing data failed to offer the Aussie exchange rate any support; the Pound to Australian Dollar exchange rate moved around 1.13% higher on the week. Meanwhile, Sterling climbed approximately 0.23% versus the New Zealand Dollar. 

On Tuesday, the Reserve Bank of Australia will make its latest interest rate decision followed by RBA Governor Lowe's speech on Wednesday and the central bank's statement on monetary policy release on Friday. Other Aussie data will include services, building, retail and trade balance ecostats. Meanwhile, in New Zealand, Tuesday will see the release of Employment Change and Unemployment Rate stats which could be influential for the Kiwi currency. New Zealand will also publish its latest building numbers in coming sessions.  

Covid cases fall

Last week, the Pound moved around 0.61% higher against the Canadian Dollar. The Loonie was sold off as risk appetite faded, and investors sought safe-haven assets. However, the CAD fall might not last considering Canada's Covid cases have significantly declined since the country adopted the strictest restrictions since March last year. Furthermore, the Bank of Canada has been surprisingly hawkish, suggesting it could begin to ease the stimulus measures it put in place as the economic recovery continues. In terms of this week's Canadian data calendar, manufacturing, trade balance, and labour market data will all print. The Unemployment Rate reading is expected to increase slightly as the number of people in work falls.