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Coronavirus Fears Weigh on GBP as New Variant Cases Rise

A pile of GBP pound coins.

Pound (GBP) Burdened by Concerns about Coronavirus Variant

The Pound (GBP) had a shaky start to this week’s trading session, slipping to a one-week low against the Euro, as UK coronavirus worries continue to weigh on Sterling.

A rise in cases of the Indian variant of the virus has led to localised guidance in affected areas, exacerbating investors’ fears that the new variant could disrupt the continued reopening of the UK economy.

These concerns are dampening the Pound despite lower-than-expected government borrowing in April.

Turning to today, the Confederation of British Industry (CBI) distributive trade index results fell short of the market forecast. Though this month’s domestic retail sales remain above seasonal norms, the lower-than-expected figures are unlikely to bolster Sterling.

Euro (EUR) Firms amid Upbeat Market Mood

The Euro (EUR) strengthened yesterday amid an upbeat market mood and an optimistic economic outlook in the Eurozone.

With the EU’s vaccination programme continuing to advance, EUR investors are hopeful that most countries’ economies will be fully reopened this summer.

There were mixed data releases from Germany this morning. The country’s final GDP figures for the first quarter of 2021 came in slightly lower than forecast.

However, Germany’s business climate index beat market expectations, with business morale at its highest level since May 2019, which could maintain EUR optimism despite the GDP figures.

US Dollar (USD) Pressured by Falling Treasury Yields

The US Dollar (USD) was dragged down by falling US Treasury yields during yesterday’s trading session.

Demand in the ‘Greenback’ was further dampened by dovish comments from Federal Reserve Governor Lael Brainard, who described the current soaring inflation as ‘transitory’.

Looking forward, the US Dollar could continue to face challenges if market sentiment remains bullish, sapping demand in the safe-haven currency.

Canadian Dollar (CAD) Sees Modest Gains with Increasing Oil Prices

The Canadian Dollar (CAD) trended higher on Monday as a jump in crude prices boosted the oil-sensitive ‘Loonie’. Today, a small dip in oil prices has limited the currency’s gains.

Australian Dollar (AUD) Gains amid Risk-On Sentiment

The Australian Dollar (AUD) strengthened in overnight trade amid a risk-on sentiment and a weakening US Dollar, with the ‘Aussie’ further benefitting from rising equities and commodities.

New Zealand Dollar (NZD) Buoyed by Market Optimism

The New Zealand Dollar (NZD) also ticked higher overnight, buoyed by the bullish market mood.

Looking ahead, the Reserve Bank of New Zealand’s (RBNZ) latest rate decision could help boost NZD, if the outlook is optimistic.