Year of the vaccine
Pound rebounds as Brexit relief sets in
It was another rollercoaster year with both Brexit and the coronavirus taking the stage, but the Pound managed to end 2020 on a high after a UK-EU deal was finally agreed before the year came to a close. The Pound has been testing the 1.37 level against the US Dollar but is still around 2.5% lower than the highs seen last year before the pandemic took hold. With Brexit seemingly dealt with, a lot of market focus is likely to be placed on the ongoing coronavirus restrictions and their impact on the economy. Boris Johnson has announced that tighter restrictions are on their way given the rapid spread of the new strain, an event which could create some resistance for the Pound's recent buoyant state. In the week ahead, services and construction data will be released. Monday's final reading for December's manufacturing Purchasing Managers' Index came in above expectations, and well beyond the 50.0 level that separates expansion from contraction, at 57.5.
Against a basket of other major currencies, the Euro finished the end of 2020 8% higher. Against the US Dollar, the Euro has been able to climb significantly as the Buck weakens, breaching the 1.23 level just before the year's close; the European Central Bank has been careful to watch the EUR exchange rate's ascent. Strict coronavirus measures in the Eurozone could continue to pressure economic performance in the coming months. Today's final Manufacturing PMI reading detailing December's productivity has shown it slightly missed expectations. Services data will be out this week, as well as Eurozone inflation figures, which could influence the Euro's movements.
Year of the vaccine
Since March 2020, the US Dollar has stumbled lower by around 13% measured against a basket of other majors on a trade-weighted basis. A few factors are softening the USD exchange rate, including the prospect of lower interest rates for longer in the US, as well as a mix of vaccine relief and optimism that the coronavirus disruption could soon be at an end, bolstering hopes for a strong economic rebound across the globe in 2021. So far this year, the US Dollar has been extending its near three-year lows, but with several events this week that could sway the Buck, there's the potential for some movement ahead. A number of Federal Reserve members will be speaking in the week ahead, and meeting minutes will reach markets on Wednesday detailing insight into the last policy announcement. In terms of economic data, manufacturing figures, employment data, and services numbers will be released and could all influence the US Dollar a moderate to high amount.
AUD and NZD
After hitting lows in March, both the Australian and New Zealand Dollars have climbed against the US Dollar and Pound. AUD/USD is now trading at its highest levels since 2018, rising by around 40% since March last year. NZD/USD is in the same boat, trading at its highest levels since April 2018, with a climb of around 32% since March. Versus the Pound, NZD/GBP is trading 13% higher since March lows, while the AUD/GBP exchange rate had a slightly stronger rebound with a 15% climb. In the week ahead, Australian services data will be out, as well as trade balance and building permits numbers which could all offer some moderate influence on the Aussie. It's an incredibly quiet week in New Zealand with just the latest Global Dairy Trade Price Index up for release, detailing the prices of New Zealand's most lucrative commodity.
Labour market data ahead
The Canadian Dollar has climbed 13% versus the US Dollar since March 2020 as the Greenback continues to weaken. Meanwhile, the Loonie has risen by around 4% against the Pound since March lows. This week, Canadian trade balance data will be released, ahead of highly influential labour market stats. The nation's Unemployment Rate is expected to climb from 8.5% to 8.6% in December. The Employment Change number is expected to come in at -25K, following November's more positive increase of 62K more people in work.