In April, the dollar is the weakest of the main currencies, and its sell-off is accelerating this week. At the other pole are the pound and the Scandinavian currencies. The EUR/USD pair, after a few days' stop just before 1.20, breaks through this level and continues to rise.
The main currency pair rises on a wave of optimism regarding the health situation in the European Union and thanks to signals that an acceleration of the EU vaccination program is imminent and has room to extend the rally.
The pound is back in favour
The British currency led the way in the Q1 along with the Norwegian krone. However, at the beginning of April, it found itself in trouble. The difficulties were mainly due to the improvement in the perceptions of the euro, which translated into a sharp turn of the EUR/GBP exchange rate. At the start of this week, however, the British currency is attracting capital the strongest. The reasons for this are well known: the rapid progression of vaccinations, which translates into a loosening of restrictions. The economic situation in the UK is accelerating while the Eurozone economy is still frozen.
Today's labour market data confirm that the British labour market stayed in good shape until lifting restrictions. The unemployment rate already came in below 5% at the end of February, and wages, excluding bonuses, grew more strongly than expected. It is only a matter of time before the pound loses its positive characteristic. Investors are already clearly positioning themselves for the lifting of restrictions in the Eurozone, expecting a catch-up in terms of vaccination statistics and a significant improvement in the economic situation. In other words: now is the time for the euro to benefit. In turn, the pound may be threatened by Brexit, which should return to the limelight. Firstly, one should assume friction between Brussels and London. Secondly, the negative impact of leaving the EU is already visible in some macroeconomic indexes.
The Norwegian krone goes up, the ruble down
Currencies linked to the oil market are on diverging paths despite the 7% increase in crude prices that took place last week. The Norwegian krone is at new record highs (the EUR/NOK pair fell below the barrier of 10.00), and the ruble is the weakest of the main currencies. The former is not only helped by the rise of the barrel price on the London Stock Exchange above 70 USD. Finally, the market has come back to life with hopes that the third wave of the pandemic in Europe is starting to fade and believes in a strong rebound in growth after lifting restrictions. Scandinavian economies have traditionally been seen as the clear beneficiaries of this.
In turn, the ruble remains volatile due to the geopolitical situation. The US has already imposed the first sanctions a few days ago. Restrictions have been extended, effective from 2019, which apply to buying government bonds on the primary market. Six companies in the technology sector and more than 30 individuals and legal entities were also targeted. The next tightening of the course by the White House is expected to come with the death of Alexei Navalny, who is going on a hunger protest. There is also further friction with European Union countries, which creates information buzz unfavourable to the ruble.