[vc_row][vc_column][vc_column_text]The pound was mixed through last week, sliding against the euro but climbing to a five-month high against the US dollar as Brexit uncertainty and positive data drives movement.

Meanwhile, the euro surged on optimism of the EU’s recovery fund and benefited from weakness in the US dollar to hit a 20-month high.

Sterling exchange rates opened this week ticking higher, with GBP/EUR at €1.10, and GBP/USD surging to $1.29.

After the US dollar struggled and the pound lacked drive last week, this week could see the pound rebound amid some optimism and the US dollar recover losses on US fiscal stimulus.

Pound boosted by Barnier’s confidence

The pound was offered support at the start of the week after anonymous sources claimed the European Union’s chief Brexit negotiator expressed confidence during a closed-door meeting that the UK and EU could reach a free trade agreement.

Sterling traders closely watched the latest round of Brexit trade negotiations and upbeat comments from Michel Barnier boosted the currency.

According to sources present at the meeting Mr Barnier stated he remains ‘confident that a balanced and sustainable deal remains possible, even if less ambitious’.

The start of last week saw the pound benefit and enjoy its best day in three weeks after upbeat reports of a coronavirus vaccine, and optimistic comments about Brexit negotiations from Prime Minister Boris Johnson.

However, these gains were soon reversed as markets worried about the possibility of Britain facing a no-deal Brexit and the UK’s dire prospects as the economy emerged from the coronavirus crisis.

GBP was supported again at the end of the week after a slew of upbeat flash PMIs and data showing British businesses reported their fastest upturn in five years as shoppers spent more, pushing spending back towards pre-lockdown levels.

However, sentiment was shattered again by downbeat comments from the European Union after talks concluded at the end of the week.

Michel Barnier noted that London had not shown any willingness in negotiations as both sides tried to break the current deadlock.

Looking ahead, due to the lack of major economic data releases this week traders will continue to focus on the ongoing Brexit negotiations.

Further upbeat reports on the progress of negotiations between London and Brussels, and any optimistic comments from the European Union could send Sterling higher this week.

Euro rally slows but still appealing on strong data and EU action

Investors may be hesitant to keep buying the euro higher this week after months of strong performance and improving support. However, the euro remains appealing and data continues to support it, while it hit a 20-month high against the US dollar.

This week’s eurozone news has so far only added to the euro’s appeal. Germany’s Ifo business confidence data showed higher expectations than forecast, reflecting optimism among German businesses.

This follows last week’s news that EU leaders agreed to a €750bn coronavirus recovery fund quicker than expected.

Support in EU fiscal policy and signs of improving data are keeping the euro appealing versus rivals like the pound and US dollar. Markets have been comparatively disappointed with the UK and US handlings of the pandemic.

While investors may be hesitant to keep buying the euro higher, upcoming Eurozone news could make it easier for the currency to hold its best levels if it impresses.

Key Eurozone data due toward the end of the week includes German and Eurozone growth rate data, while German retail sales and Eurozone inflation stats may also prove influential.

This data will show insight into the depth of recession in the Eurozone, and if it comes in notably worse than forecast, it could hurt expectations of Eurozone resilience. This, or an unexpectedly hawkish tone at Wednesday’s US Federal Reserve decision, could knock the euro.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]

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* Information courtesy of Currencies Direct, Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

The contents of this report are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. Currencies Direct cannot be held responsible for any loss or damages arising from any action taken following consideration of this information. This article was written by Currencies Direct[/vc_column_text][/vc_column][/vc_row]