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GBP Down on Virus Worries, Oil Weakens but Copper Gains

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Note  The table above is updated before publication with the latest consensus forecasts. However, the text charts are prepared ahead of time. Therefore there can be discrepancies between the forecasts given in the table above and in the text charts. 

Rates as of 0500 GMT

Market Recap

The reasons for the two weakest currencies on my list arent hard to divine.

For the beleaguered pound, the successful conclusion of the Brexit talks offered just a momentary breather. It was back into the dumps after PM Boorish Johnson ordered a third economically disastrous national lockdown for England, following a similar move in Scotland. He warned that the National Health Service risked becoming overwhelmed by a surge in cases of the new Covid19 strain. The lockdown will last at least until midFebruary. 

The UK is definitely in bad shape with regards to the virus. Other European countries we can still call the UK European, cant we? saw a spike around November but have since gotten their situations somewhat under control. In the UK however its still headed up, up, up. 

Combined with the kickinthepants from Brexit, the general lockdown is bound to make the Bank of England tilt dovish. The overnight index swap OIS market is now forecasting a base rate of 0.12 by the end of this year i.e., fully discounting negative rates, vs 0.05 a week ago i.e., a 5050 chance of negative rates. Thats definitely negative for the pound.

Meanwhile, no prizes for guessing why CAD is the 2 loser…

Oil Prices Little Changed Before OPEC Resumes Meeting on Feb Output Levels

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