New president, same soft dollar

Key Movers

The euro was the best performing currency yesterday, despite concerns of rising virus numbers across Europe. The ZEW survey, an indication of confidence levels within the economy and investors, shows that pessimism with the European economy was abating, with strength in the export sector and vaccine distribution playing critical roles across the single bloc.The UK was set to release its Consumer Price Index. With a low interest rate environment, possibly set to continue for many months or even years yet, inflation has been rising slowly, and today’s release will provide the market some indication of just how much of a rise we are observing. The release isn’t expected to change the trajectory of central bank policy, with an expected figure of 0.5%, however a significantly stronger than expected number would make policymakers think about the impact of a long and low interest rate policy, and the market may start pricing in an interest rate increase sooner than we think, something which will be beneficial for the pound.The Australian dollar edged higher through trade on Tuesday as investors chased a rebound in risk sentiment and uptick in commodity prices. Having tested a break below supports at 0.7680/60, the AUD pushed back through 0.77 US cents as equities and rates drove gains across risk assets. The improvement across equities began in the domestic session with the ASX and Hang Seng extending recent gains, before a correction across Europe, triggered by falling bond yields in Italy, capped AUD upside at 0.7725. As short term Covid-19 concerns continue to plague the broader risk narrative, the AUD remains range bound between 0.7640 and 0.78, with broader ranges extending between 0.75 and 0.7850.