Currency View by OFX

Last week’s news

  • UK economic output fell 9.9% in 2020, the largest drop in 300 years and more than twice the fall during the financial crisis, laying bare the scale of the pandemic’s impact. Further figures released last Friday showed UK output was down 7.8% from the final quarter of 2019, twice the decline in Germany and three times the drop in the US. The differences reflect long periods of tough restrictions in the UK as well as generous US stimulus plans and tax cuts in Germany. The decline was the biggest since The Great Frost of 1709 and bigger than the 9.7% contraction of 1921. The Bank of England expects the economy to contract further in the first quarter of 2021 because of the national lockdown. However, the UK have been relatively swift with its vaccine campaign, raising hopes of an economic recovery for the spring.
  • Amsterdam surpassed London as Europe’s largest share trading centre last month as the Netherlands scooped up business lost by the UK since Brexit. Daily shares traded on Euronext Amsterdam and other Dutch trading platforms increased more than fourfold since December. The surge came as volumes in London fell sharply to €8.6bn. The shift was prompted by a ban on EU-based financial institutions trading in London because Brussels has not recognised UK exchanges and trading venues as having the same supervisory status as its own. Because of this, an immediate shift of €6.5bn worth of deals moved to the EU when the Brexit transition period concluded, roughly half the amount of business that London banks and brokers would normally handle. Paris and New York have also seen trading increases since the end of the Brexit transition.
  • House Democrats told Republicans they would set a ‘new terrible standard for presidential misconduct’ if they acquitted Donald Trump of stoking the January attack on the US Capitol as they closed out their case on the former President’s impeachment trial. For Trump to be convicted, 17 Republicans would have had to vote against him, along with every Democrat but only 7 crossed the floor.

Looking ahead

  • Major currencies were able to gain some ground against the USD last week, sustaining a break above their short-term support levels, being 1.2075 for the EUR/USD pair, 1.3750 for the GBP/USD pair, and the 0.7700 handle for the AUD/USD. As long as these levels hold, the Greenback might be under pressure, it depreciated 1.08%, 0.83%, 0.8%, 0.61%, 0.47%, and 0.35% versus the Aussie dollar, British pound, Swiss franc, euro, loonie, and Kiwi dollar over the last week, respectively.
  • Despite the Greenback’s weakness, the Kiwi dollar did not perform positively against G7 currencies last week, as New Zealand’s largest city, Auckland, went into lockdown as of midnight on Sunday as authorities investigate three new cases of COVID-19. The Kiwi dollar fell 0.73%, 0.48%, 0.27%, and 0.12% versus the Aussie dollar, pound, euro, and loonie. New Zealand Prime Minister Jacinda Ardern said at a news conference Sunday that the alert level requires social distancing and signals the risk of community transmission.
  • Goldman Sachs Group said the reborn weakness in the US dollar is pushing emerging-market currencies into a bullish mode. MSCI Inc.’s index tracking developing-nation currencies climbed to a record on Friday as the dollar posted its most significant weekly drop in 2021. Implied volatility fell to the lowest since July, highlighting enthusiasm about a vaccination-led global recovery and the prospect of more US stimulus. Over the last week, the South African rand, Czech koruna, Singapore dollar, and Mexican peso rallied 2.04%, 0.77%, 0.72%, and 0.67% respectively against the US dollar.
  • BoE Governor Andrew Baileys firm criticism of the European Commission has deepened anxieties in the City of London that the UK and EU will fail to agree a series of equivalence deals that will allow the UK to trade more freely in Europe’s financial services market following Brexit. Andrew Bailey insisted last week that the EU were making a ‘mistake’ in shutting the city out of its markets since the start of the year and vowed to carry on setting financial regulation in the UK’s interests. The EU in return stated that the UK must outline its plans for future regulations before it can consider granting an ‘equivalence’ status to Britain in most areas of financial services. Bailey argued that ‘this is a standard that the EU holds no other country to and would not agree to be held to itself.’

Key market events this week

  • Tuesday
    • EUR Growth Rate QoQ (Q4)
    • EUR ZEW Economic Sentiment Index (Feb)
  • Wednesday
    • GBP Core Inflation Rate YoY (Jan)
    • CAD Core Inflation Rate YoY (Jan)
    • USD Retail Sales MoM (Jan)
    • USD FOMC Meeting Minutes
  • Thursday
    • AUD Unemployment Rate & Employment Change (Jan)
    • JPY Inflation Rate YoY (Jan)
  • Friday
    • USD Markit Manufacturing PMI Flash (Feb)

  
 

Disclaimer

Note that specialist Accounting, Property, Mortgage and Foreign exchange services offered by our partners, Stoneturn, OFX, Hartley’s and LJ Hooker are via referral arrangement only. Australian Expatriate Services are not responsible for any advice/services provided by these Firms.

Search