Despite UK markets being closed for the bank holiday weekend, the pound wasn’t away resting. With other nations still open for business, FX price action continued in the UK’s absence with sterling sitting 0.26% higher than Thursday’s close. The pound was buoyed by mild USD weakness in yesterday’s session, while Prime Minister Johnson’s announcement that the service sector will partially reopen on Monday April 12th definitely added to the positive mood. While the news that the government’s conditions to reopening parts of the economy at the next available benchmark provided a boost to sterling asset’s, optimism was tempered somewhat by the hardline stance surrounding international travel and the potential for domestic vaccine passports. PM Johnson will face resistance on the latter development this week as politicians return from the long weekend, with more than 70 MPs vowing to oppose such a policy last week due to it being “divisive and discriminatory”. This week, there is little new information scheduled for release on the economic calendar for the UK, with the main data points being final readings of March PMIs.
The euro returned from a four-day holiday to see the US dollar weaker across the board, which allowed EURUSD to climb back to 10-day highs while headlines around the eurozone remained light over the weekend. Although risk appetite has improved since last week, the lockdown situation in the eurozone and the elevated virus numbers will keep a lid on EURUSD in the coming weeks, especially as the US vaccination speed makes a case for a faster recovery in the US. Starting on April 19th, however, the EU will add Johnson & Johnson vaccines to its ammunition while Pfizer is set to deliver 200mln vaccines to the EU in Q2. AstraZeneca may miss its second-quarter deliveries target after the supplier encountered issues with its vaccine yield at EU production sites. For today, euro traders will focus on eurozone Sentix investor confidence data at 09:30 BST and eurozone unemployment data at 10:00 BST for further cues on euro price action, although broader dollar moves will likely be a larger driver for the currency.
With US yields stalling and equities pushing higher since the beginning of the week, the dollar returned some of its Q1 gains as rising risk-on sentiment weighed on the currency. The US reported a strong rebound in jobs and services sector activity for March as Friday’s Nonfarm Payrolls and ISM services index continued to climb higher. The US added the most jobs in seven months as fewer lockdown restrictions weighed on labour market activity, with Nonfarm payrolls increasing by 916,000 last month vs Bloomberg’s consensus for a 660,000 increase. This resulted in the unemployment rate falling to 6%. Meanwhile, the figures from the ISM show how the looser business restrictions are helping a rebound in sectors that struggled most throughout the pandemic. Treasury yields failed to test March highs on Monday despite the impressive data, which may imply a slowdown to the dollar bull run as yields shrug off incoming data. Today’s calendar is virtually blank for the US, but the IMF’s release of the World Economic Outlook may provide USD volatility today while markets continue to watch risk trends. Beyond that, the focus will be on Wednesday’s FOMC minutes.
The Canadian dollar joined the rest of the G10 in taking a chunk out of the US dollar yesterday, with the loonie climbing 0.42% over the course of the session. The rise in the Canadian currency occurs despite the nation’s two largest provinces tightening lockdown measures at the margin. Over the weekend, Ontario – Canada’s largest province – enacted a four-week state of emergency, which will see restaurants return to takeout only, while essential shops will run at limited capacity. This morning, the loonie sits lower as the greenback bounces back mildly against the G10 currency board. Meanwhile, WTI sits in the green ever so slightly after suffering big losses in yesterday’s session. Crude futures slipped 4.6% yesterday as rising cases in Europe and the potential for Iranian exports to come back online pushed the price below $60 per barrel. However, analysts expect that talks between the US, Iran and the remaining members of the 2015 nuclear deal in Vienna later today will be the first part of a long and drawn-out process. This suggests that sanctions on Iranian exports aren’t likely to be eased any time soon.