It was another strong day’s showing for the dollar against most of its rivals. The economy looks fighting fit buoyed by a month of good figures. Against the pound the looming prospect of a no deal Brexit has pushed Sterling down. With the UK still struggling with COVID-19, the pound faces headwinds from every direction.
The Australian dollar is showing strong against USD. After correcting back to 0.742 during Wednesday it was trading strongly as markets opened in Europe at 0.7483.
With Britain staring down the barrel of a no deal exit, AUDGBP is on the up. From 0.554 before last night’s meeting between Johnson and Von der Leyen, it shot up to 0.5631.
AUD is also hitting high notes against the euro. At the time of writing AUD stands at 0.6189 having been at 0.6149 before the meeting. The euro is also being held back by the impending interest rates decision from the European Central Bank (ECB) and the possibility of a fresh stimulus. The ECB’s desire to see the euro below USD$1.2 could create pull back in the coming days.
The Brexit Effect
Talks proofed fruitless yet again. The two sides remain as far apart as ever on three key issues: fishing rights, legal oversight of arrangements and level playing field rules. Negotiations have been extended to Sunday but with neither side showing signs of movement, things are looking grim.
The pound had more bad news with growth more or less flat lining in October. Despite the first vaccine doses being given out the UK has to deal with stark figures. It has the highest death toll in Europe and has suffered the biggest hit to its economy of any major nation. The UK’s economy stands 8% smaller than it did at the beginning of the crisis.
The Recovery Continues
Australia is still feeling the warm glow of yesterday’s economic figures. The Reserve Bank of Australia (RBA) effectively declared the recovery more or less complete as confidence returned to pre pandemic figures. With a vaccine likely to arrive in the new year, and states bringing down restrictions, Australia looks to have come through in fine shape.
The only headwind has been the ongoing spat with China. The argument over a faked picture of an Australian soldier is the latest trigger, but this is just part of a much wider hostility between the two. Even so, with latest figures on consumer inflation expectations remaining Australian consumers don’t seem to be put off.
In the US, the delay in the stimulus dampened demand for risk but stopgap funding offered some boost. The ongoing wait for a vaccine also kept risk sentiment down. The worsening news from the news kept the dollar down during the day. Depending on the impact it has on global risk sentiment, it could lead to a recovery of USD in coming days.
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