US treasury yields give CAD momentum

Key Movers

The euro continued to hold strong, despite many factors acting against them. Germany was the latest to tighten restrictions, with Chancellor Angel Merkel said that if they are unable to hold off the ‘UK virus’ variant, then they could see an uptick in cases by Easter up to 10 times the current rate. The euro seems to be held up by low interest rates, vaccine optimism and lack of demand for USD from global investors.Great British pound bounced as Governor of the Bank of England Andrew Bailey suggested that negative rates may not be the best idea in the short term. Many believed Bailey would cut the UK interest rate into the negative for the first time at the next meeting on February 4. This is looking less likely. Bailey warned that negative rates would slow economic recovery unnecessarily, as it would mean there are less available funds to fuel recovery. The pound reacted well to the news, pushing GBPUSD back above the 1.36 handle. The Bank of England will most likely intervene, should they have to. However, this could be in the form of quantitative easing before a rate cut. Bailey also mentioned how he thought that the UK unemployment rate was closer to 6.5%, than the 4.9% official figure, and warns that it may get far worse in the spring once the furlough financial aid dries out. This may force his hand into a rate cut.The Australian dollar clawed back losses through trade on Tuesday, climbing through 0.77 US cents amid broader USD selling. With little of note to drive direction through the domestic session, the AUD bounced between 0.7690 and 0.7720 as investors struggled to find a marker for direction, instead sidelining bets ahead of the North American trading day.