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The Pound near two-year highs

The Pound near two-year highs 

The Pound has begun 2022 on a positive note, trading above $1.35 against the US Dollar and near two-year highs against the Euro, at interbank levels of €1.1990 today. Sterling's been enjoying a rise following the Bank of England's December interest rate decision to raise rates to 0.25%. Markets expect further action by the central bank, which could bolster the British currency higher. Additionally, investors seem to be confident that there won't be any additional imminent restrictions in the UK, giving the economy more opportunity to grow as the seemingly less severe Omicron variant spreads. UK house price and construction stats will be released in the week ahead.

Pressured lower

The Euro has been a weaker performer in the market of late, trading largely range-bound versus the US Dollar and noting consistent declines in the second half of 2021. A lot of the Euro pessimism has come as central banks worldwide look to change their policies, hiking interest rates and easing bond-buying. Meanwhile, the European Central Bank has been lagging behind in its approach, which has put pressure on the common currency. Additionally, Omicron is causing worker shortages and mounting healthcare pressures, which are also playing a part in Euro weakness. In the week ahead, Eurozone inflation stats will be released, as well German Industrial Production data.

Jobs report ahead

The US Dollar has started the year in a strong position once again. This week, the Federal Reserve's Federal Open Market Committee will meet on Wednesday, and it's expected more details will emerge about the withdrawal of stimulus, with current expectations for the central bank's bond-buying programme to end in March. One of the main data points in the week ahead will be the Non-Farm Payrolls report on Friday, which will highlight how many people entered the workforce in December and could create USD movement.

Softening against the US Dollar

The Australian Dollar has been trending near two-week lows versus the US Dollar, as the Buck's strength continues on US interest rate hike bets. The New Zealand Dollar has also been weaker against the US currency. Yesterday, Australian manufacturing stats showed a dip in activity in December. Last month, Australia removed the majority of its Coronavirus restrictions after hitting a 90% vaccination target. Still, the Omicron variant has caused a surge of infections above 25,000 a day, and test kits are few and far between or being charged for at high rates. If Australia looks to put restrictions back in place, it could impact the way the Aussie Dollar trades.

In terms of data, the Reserve Bank of Australia will release its chart pack, and Aussie service stats will also print. It's a quiet week for New Zealand data, with nothing due for release this week.

Clawing back losses

The Canadian Dollar has been strengthening against the US Dollar today, after falling on Monday, as oil prices climbed. One of Canada's most significant exports, oil, gained value after OPEC+ producers opted to stand firm on plans to increase production in February. Today, Canadian manufacturing data showed a slight decline in activity in December, while the rest of the week will see influential data such as trade balance and labour market stats come to light.