GBP struggles against CAD and USD ahead of stimulus bill passing

Pound Sterling (GBP) has extended gains against a host of major currencies at the beginning of the new trading week, though appears to be struggling against both the US dollar (USD) and Canadian dollar (CAD) ahead of President Biden’s stimulus bill passing.

At the time of writing, the British pound to US dollar (GBP/USD) exchange rate is trading at USD 1.39, though is expected to recover towards the USD 1.41 level which has been experienced in past weeks.

Having slipped against the euro (EUR) during the previous trading week, the British Pound (GBP) has managed to recover losses against the single currency, hitting the EUR 1.17 mark once again.

Outlook for the UK economy is becoming increasingly more optimistic following yesterday’s comments from Bank of England (BoE) Governor, Andrew Bailey, who claimed that there was now ‘light at the end of the tunnel’ for the UK economy.

The Eurozone economy, however, continues to be plagued by its slow coronavirus vaccine rollout as well as rising COVID-19 cases in Italy and Greece. Euro (EUR) gains could, therefore, become limited over the coming days as coronavirus cases continue to spiral in the bloc.

Risk-on and emerging market currencies, including the Australian dollar (AUD) and South African rand (ZAR), began to exert pressure on the British pound (GBP) last week, though Sterling has edged higher during today’s session.

GBP/AUD and GBP/ZAR rebound

Throughout 2020, the British pound to Australian dollar (GBP/AUD) exchange rate and the British pound to South African rand (GBP/ZAR) exchange rate was heavily impacted by mixed signals over the likelihood of a UK-EU Brexit trade deal.

As Brexit is no longer a primary driver for the British pound (GBP), with focus now placed on coronavirus vaccine progressions, Sterling has been able to rebound against these risk-on currencies.

Having fallen to AUD 1.78, the British pound to Australian dollar (GBP/AUD) exchange rate is trading at AUD 1.80 during today’s session following improved UK consumer confidence. A report from YouGov revealed UK consumer confidence has increased to 105.4, which is the strongest level seen during the coronavirus pandemic.

The South African rand (ZAR) has recently benefited from US stimulus hopes, as it’s revealed that Biden’s coronavirus stimulus bill is on the brink of being passed by the House of Representatives.

At the time of writing, the British pound to South African rand (GBP/ZAR) exchange rate is trading higher at ZAR 21.31, and the currency pair could extend further gains amid improved market sentiment.

The New Zealand dollar (NZD) is also struggling to advance against the British pound (GBP) and other major currencies as a result of the UK’s improved consumer confidence.

Darren Laxley, YouGov’s director of reputation research, stated “with the furlough scheme extended, the strength of the vaccine rollout and the recently announced roadmap out of lockdown, it would be surprising not to see these numbers improve even more as we head into the spring.”

At the time of writing, GBP/NZD has advanced to NZD 1.94; and with daily coronavirus infections in the UK continuing to dwindle, it’s hoped that the currency pairing could rise further.

Euro lower against major currency rivals

Over recent weeks the euro (EUR) has capitalised on US dollar (USD) weakness, despite concerns over rising coronavirus cases in the Eurozone.

At the time of writing, the euro (EUR) is trading lower against most of its G10 rivals, including the Australian dollar (AUD), US dollar (USD), Japanese yen (JPY) and British pound (GBP).

While a shift in sentiment could be influencing the euro to Japanese yen (EUR/JPY) exchange rate, the currency pair is trading slightly lower at JPY 129.47.

Similarly, the euro to Australian dollar (EUR/AUD) exchange rate has also fallen, as the currency pair is down to AUD 1.55.

Although investors remain cautious, the greenback has been benefiting from President Joe Biden’s USD 1.9 trillion coronavirus stimulus bill and its imminent passing. It’s thought that the House of Representatives could pass the bill as early as Tuesday evening.

The upbeat prospects pushed the US dollar (USD) higher against the euro (EUR), as the currency pair reached USD 1.19.

The Canadian dollar (CAD) is also benefiting from US stimulus hopes, which has driven the “Loonie” higher against its US and British counterparts.

Canadian dollar firms amid increased bets for US stimulus

The Canadian dollar (CAD) continues to remain sensitive due to uncertainty over oil prices and coronavirus cases, as 2020 stood as the country’s worst economic year on record with gross domestic product (GDP) falling 5.4%. That being said, the ‘Loonie’ has surged against a host of major currencies so far during the new trading week as the economic outlook continues to improve.

The British pound to Canadian dollar (GBP/CAD) exchange rate has fallen to CAD 1.75, while the US dollar to Canadian dollar (USD/CAD) exchange rate is also lower at CAD 1.26.

As it stands, Canada’s seven-day average of daily coronavirus cases is 2,917, down from 6,799 at the start of January, which takes the total number of infections in the country to over 890,000.

Throughout the coronavirus crisis, unemployment has remained a primary concern for Canada, as it’s revealed that unemployment rose to 9.4% in January. Friday will see the release of the latest job market data for Canada. Better than expected figures will provide further support for the Canadian dollar (CAD).

The Bank of Canada (BoC) will also hold its March monetary policy meeting this week, though it’s thought that there will be little shift in stance.