Geopolitical Tensions Remain High in Risk-Off Market

Pound Sterling (GBP)

The Pound was able to edge higher against many currency rivals over the long Easter weekend. Brexit concerns took a backseat as negotiations are not set to begin in full until May or June, making the Pound comparatively stable amid an environment of rising geopolitical uncertainty.

The coming week will be relatively quiet in terms of UK data, meaning the Pound is more likely to be influenced by developments elsewhere. The biggest focus for traders will be tensions between the US and North Korea, as well as the imminence of the French Presidential election. The first round of the election will be held next Sunday.

US Dollar (USD)

The Pound to US Dollar exchange rate put in solid gains last week and continued advancing when markets opened for this week’s session. The pair had reached a new April high on Tuesday morning.

Over the weekend, GBP/USD surpassed new psychological support levels after rising geopolitical tensions in the US weakened Federal Reserve rate hike bets slightly. Fed rate hike expectations also dipped last week as a result of comments from US President Donald Trump, who stated he ‘likes a low interest rate policy’.

Tension between the US and North Korea has dented US Dollar support in recent sessions, allowing Sterling to more easily advance. With both states having threatened military action over the last week, markets are highly jittery.

Euro (EUR)

The Pound to Euro exchange rate gained around a third of a cent over the Easter Weekend. The pair trended near its best levels since February as political uncertainty weighed on the Euro.

French election opinion polls have kept Euro investors on their toes with many analysts claiming the first round is too close to call. According to polling figures, anti-EU Marine Le Pen is predicted to win the first round of the election, followed closely by pro-EU Emmanuel Macon. According to polls, Macron will win comfortably in the second round.

However, with many voters still undecided and two other candidates close behind in terms of first round polling figures, investors are unlikely to get too hopeful – especially after last year’s surprise Brexit and Trump victories. Conservative Francis Fillon and anti-EU Jean-Luc Melenchon’s solid polling figures in the first round have made this a four-candidate race, so the Euro will be jittery until next Sunday’s first round vote.

Australian Dollar (AUD)

The Pound to Australian Dollar exchange rate surged when markets opened this week as the Pound was seen as a safe investment in comparison to the risky Australian Dollar.

Rising geopolitical tension between the US and North Korea over the last week has left risk-correlated currencies unappealing and investors looking for more reliable places to store their assets.

The Australian Dollar may be influenced slightly by Tuesday’s Reserve Bank of Australia (RBA) meeting minutes. However, overall the ‘Aussie’ is predicted to be weak and volatile over the coming week.

New Zealand Dollar (NZD)

Despite low appetite for risk-correlated currencies in the last week, the Pound to New Zealand Dollar has been unable to hold its best levels.

Solid Q1 growth data from China, New Zealand’s biggest trade partner, bolstered the New Zealand Dollar – with GBP/NZD briefly dipping to 1.7892.

Canadian Dollar (CAD)

The Pound to Canadian Dollar exchange rate gained around a third of a cent during the Easter Weekend and trended at its best levels in two weeks.

Global political concerns and mixed commodity news have kept the ‘Loonie’ under pressure. Prices of oil, Canada’s most lucrative commodity, have softened this week due to persistent concerns that US shale oil will continue seeing ramped up production in the future.

Disclaimer: This update is provided by TorFX, a leading foreign exchange broker, its content is authorised for reuse by affiliates.