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Pound Falls to Two-Week Low against Euro as Brexit Tensions Rise

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Pound (GBP) Dented by Renewed Brexit Tensions

The Pound (GBP) struggled yesterday, slipping to a two-week low against the Euro, as Brexit tensions rise between the UK and the EU over the Northern Ireland protocol.

Boris Johnson wants to remove checks on goods crossing the Irish Sea, while European Commission President Ursula von der Leyen opposes any changes to the current backstop agreement, insisting that it is ‘the only possible solution’ to the situation in Northern Ireland.

Turning to today, Sterling is likely to remain under pressure as Brexit tensions continue to bubble and UK coronavirus cases rise.

Euro (EUR) Buoyed by German Business Optimism

The Euro (EUR) firmed through yesterday’s trading session following the release of this month’s business climate index from Germany, which revealed that business morale has risen to a two-year high, exceeding market expectations.

This was a welcome result for EUR investors after Germany’s finalised GDP figures showed a larger-than-forecast contraction of growth in the first quarter of this year.

This morning’s business confidence and consumer confidence releases from France both printed above expectations as the EU continues to lift restrictions and advance its vaccination programme. This optimism could see the Euro make further gains today.

US Dollar (USD) Weakens amid Fed Policy Comments

The US Dollar (USD) remained under pressure yesterday amid expectations that the Federal Reserve will maintain its dovish stance.

Chicago Fed President Charles Evans reiterated the Fed’s view that the current spike in inflation is transitory, while a risk-on sentiment also dragged on the Dollar.

If the upbeat market mood prevails through today’s trading session, it’s likely that demand for USD will remain muted.

Canadian Dollar (CAD) Rangebound as Oil Prices Hold Steady

The Canadian Dollar (CAD) held steady yesterday as crude prices remained stable at $65 a barrel, causing the oil-sensitive ‘Loonie’ to trade in a narrow range.

Australian Dollar (AUD) Gains amid Upbeat Market Mood

The Australian Dollar (AUD) ticked higher in overnight trade, boosted by a bullish market mood, low demand for USD and rising commodity prices.

New Zealand Dollar (NZD) Soars Following RBNZ Plans

The New Zealand Dollar (NZD) surged overnight in response to the Reserve Bank of New Zealand’s (RBNZ) latest policy meeting, in which the RBNZ revealed plans to begin raising interest rates in September 2022.

The hawkish announcement surprised investors and drove up demand in the risk-sensitive ‘Kiwi’.