In a festive week culminating in Christmas celebrations, the world grappled with news of a new and potentially lethal coronavirus strain. And probably you are now wondering how the g7 fx currencies performed in the turbulence? Here is what happened. In forex currency news, economic updates took backstage—this left performance of the g7 currencies to Brexit, the US politics, and covid 19 news. The emergence of a new coronavirus variant added to the nix.
But first, a look at the fundamentals that drove the market.
The Fundamentals
Brexit Deal
In the week ending Dec 27th, Brexit talk primarily dominated forex news. An imminent EU-UK trade deal fueled demand for the gbp currency. Confirmation of the agreement triggered a massive sell-off towards the end of the week reversing the short-term uptrend.
The Brexit deal overshadowed the US stimulus bill uncertainty putting the dollar back on foot.
Covid 19 News
As the world grapples with covid 19 pandemics, a newer and potentially lethal strain emerged in the UK. The new strain of the novel coronavirus caused jitters globally. And yet its effects remain to be seen.
Since its discovery in Britain, the UK reported the highest covid 19 fatalities in the week, since April. In response to the new threat, Britain introduced containment measures in some parts of its country and may reintroduce full lockdown measures soon. The new variant has spread rapidly to several counties.
BioNTech CEO Ugur Sahin echoed that the coronavirus will be with us for at least ten years. He further indicated that the BioNtech vaccine could be adjusted to combat the new UK strain in the next six weeks.
Globally, coronavirus confirmed cases reached 80.1m, fatalities 1.8m, and recoveries 54m. Asia, Mexico, Europe, Russia and the US heavily hit. In the fight against the vice, many countries rolled out vaccination campaigns in the week.
The ongoing vaccination activities generated positive sentiments.
US Politics
US President Donald Trump declined to sign the stimulus bill. The US Congress approved the stimulus bill ($900b), but the President refused to sign it. He wants weekly jobless claims increased from $600 to $2000 per week.
Lawmakers are working hard to have the stimulus bill approved. The bill will also unlock funding to wade off a looming government shutdown.
Economic Updates
In the week ending in Christmas celebrations, economic updates had little impact on the forex currency news. Covid 19 news, new mutant strain, and Brexit talks pushed financial updates to the backstage. Besides, several countries were quiet on the economic calendar.
Oil Prices
Over the week, oil prices dropped by 1.77%. Coronavirus mutants in Britain helped to drive down the price of oil early in the week. Changes in oil prices directly impact commodity-related forex assets.
Economic Performance of the G7 fx Currencies
Table: performance summary of the g7 currencies
| Currency pair | Dec 21st | Dec 27th | Average | Percentage change | Remarks |
| USD | 89.949 | 90.250 | 90.271 | 0.330 | increase |
| GBP/USD | 1.3463 | 1.3548 | 1.3484 | 0.2071 | increase |
| EUR/USD | 1.2242 | 1.2204 | 1.2196 | 0.4162 | drop |
| USD/JPY | 103.30 | 103.48 | 103.52 | 0.16 | increase |
| USD/CHF | 0.8855 | 0.8889 | 0.8885 | 0.6454 | increase |
| USD/CAD | 1.2854 | 1.2869 | 1.2870 | 0.6728 | increase |
| AUD/USD | 0.7585 | 0.7599 | 0.7575 | 0.3279 | drop |
| NZD/USD | 0.7102 | 0.7123 | 0.7093 | 0.0281 | drop |
Forex USD End the Festive Week in the Green
The American dollar made a comeback in the week, after dropping by 1.16% in the previous week. This marks a second weekly gain for the forex usd in the last six weeks. The dollar expanded by 0,23 % to close the week at 90.223.
On the economic front, the US had a relatively busy week. Consumer confidence dropped from 96.1 to 88.6, due to the coronavirus pandemics. On the positive side, weekly jobless claims fell from 892k to 805k. Durable goods orders rose by 0.9%, adding to the positive forex currency news.
However, personal spending disappointed, falling by 0.4%, reversing a 0.3% increase in the previous week. Inflation, 3rd quarter GDP, the housing sector, and consumer sentiments failed to stir the forex market.
Brexit Talks Uplift the Sterling Pound
The Uk also had a busy week on the economic diary. The UK’s economy expanded by 16% in the third quarter providing the much-needed support for the sterling pound. In the second quarter, its economy had contracted by 19.8%.
On a positive note, the Business investment also increased by 9.4%, though not enough to reverse a 26.5% drop in the second quarter. Despite the economic report, Brexit talks, and covid 19 news primarily drove gbp usd currency pair performance.
While the fight on the coronavirus intensified, a new strain emerged, complicating things further. This led to the reintroduction of lockdown measures resulting in a weakened sterling pound earlier in the week.
However, later in the week, Brexit talks came to the aid of the sterling pound. And in the end, the pound increased by 0.27% to 1.3560. In the previous week, it had rallied by 2.27%.
EUR/USD
By the close of the week, the euro dropped by 0.4162% to 1.2204. In the previous week, it had risen by 1.20%. On the economic diary, Eurozone had a relatively quiet week. Consumer confidence improved from -17.6 to -13.9, but still way below its -11.2 average.
The coronavirus spikes and the emergence of a new variant weighed heavily on the euro. The reintroduction of lockdown measures in several Eurozone member states made things worse for it.
USD/CHF
Swiss franc dropped 0.6454% to the dollar closing at 0.8889. Continued covid 19 spikes and new variants weighed heavily against the Swiss franc from the week’s onset. The ongoing coronavirus vaccinations also pushed the swiss franc down.
However, the UK-EU deal uplifted the Swiss franc at the end of the week but was not sufficient to uplift it from the red zone.
USD CAD Forex Sees Red
In the week culminating in Christmas celebrations, Canada had a relatively quiet week leaving Lonnie’s performance to covid 19 news and oil prices. On the economic frontline, Canada’s economy expanded by 0.4% in October. In the previous month, it had grown by 0.8%.
Yes, Canada had an excellent economic update, but it was not enough to salvage the Lonnie from covid 19 news’s adverse effects. And the new virus strain added pressure to usd cad forex. More damages came as oil prices went southwards.
As traders celebrated Christmas, the Lonnie limped, closing down by 0.60% to 1.2865. Previously the Canadian dollar had fallen by 0.15%.
Asia-Pacific Currency News
A Bearish Week for AUD USD Forex
In the week ending Dec 27th, aud usd forex dropped by 0.22% to close lower at 0.7605.
In a quiet week on the financial front, private sector credit and retail sales supported the Australian dollar. The retail sales increased impressively by 7% while private sector credit improved by 0.1%.
However, coronavirus news and new strain downplayed the positive forex currency news. Traders shunned the high yielding Australian dollar on concerns over the UK’s fast-spreading covid 19 strain.
The Kiwi Dollar Weakens
In New Zealand, it was a relatively quiet week on the economic diary. It was a bad week for the kiwi traders as it closed the week weaker by 0.27% down to 0.7117.
There was no economic data to provide direction for the kiwi dollar. Counter currency, covid 19 news, and new strain drove forex currency news in the kiwi land.
Fears of the new coronavirus strain threatening global recovery efforts worked negatively against the kiwi dollar.
Also, a possible stimulus package optimism in the US helped to underpin the kiwi dollar. However, the Brexit talks leveraged the kiwi dollar to regain losses made in the earlier part of the week.
Japanese Yen Closed in the Red Zone Last Week
There were no economic updates from Japan until Friday. However, the forex currency news on Friday had little impact on the Japanese yen. Retail sales figures improved by 0.7%, but the yen dropped by 0.13%, closing at 103.43 to the US dollar.
Previously the yen had risen by 0.71%. The yen’s poor performance was likely driven by positive news on covid 19 vaccines and stimulus optimism in the US. The new strain of covid 19 in the UK added to the downturn of the Japanese yen.
Conclusion
The US dollar gained against all other g7 currencies except the sterling pound. Brexit talks predominantly featured in the forex currency news and was the primary driver in the forex market over the week.
The fast-spreading covid 19 new variants discovered in the UK had traders worried over the week. It poses new challenges in economic recovery efforts and the fight against the deadly virus.
Finally as we approach the end of the year, I wish a happy new year!