In the Flow
Upward pressure on the yen eased somewhat as renewed virus fears spurred more haven demand of the US dollar. Kiwi underperformed its G10 peers.
Market Psychology
USD still has scope for a further recovery as risk correction can extend
EUR/USD – EUR/USD bounced after the initial negative impact from the increased COVID concern centred on the new UK strain, but there is still some downside scope as the underlying loss of risk appetite remains and a correction is due. But in the absence of negative Brexit news 1.21 should hold short term.
In-Depth Report(s)
The COVID mutation in the UK is attracting a lot of interest and could spread within Europe. However, the percentage of people hospitalized and vaccine effectiveness means this is a setback, not a disaster.
Chart of the Day
Sharp gap higher has reached the 0.9190 Fibonacci retracement
Daily Outlook and Strategy
GBP still vulnerable even though initial reactions to new strain may be overdone
Data to highlight relative weakness of UK GDP
Brexit talks may now be key to the next move, but global risk appetite should stabilise
NOK looks well supported with the oil price fairly steady at higher levels.