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Hopes for a clean-break Brexit boost GBP/EUR exchange rates

THE pound has been strongly influenced by Brexit over the past two weeks, making tentative gains against the euro, but having a harder time against the US dollar.

The GBP/EUR rate has improved over the last fortnight, opening at 1.10 euros, and hitting 1.12 last week; the pairing has, most recently, fallen back to 1.11. On the other side, the EUR/GBP exchange rate has fallen from £0.90 to £0.89, over the same period.

Elsewhere, the GBP/USD exchange rate opened at $1.28, and rose to $1.30 over the past two weeks; sterling has since fallen to $1.29 in the pairing. The EUR/USD rate has fallen from $1.16 to $1.15, over the two-week period.

The last fortnight has seen the pound fluctuate on Brexit speculation, with only limited domestic data being released, to give traders something to go on. The main support for sterling has been the assumption that a no-deal Brexit could be avoided, following remarks from EU Chief Negotiator Michel Barnier.

Mr Barnier did not specifically rule out a no-deal Brexit, but raised hopes for imminent progress in negotiations that could lead to a good deal being struck, between the UK and the EU.

Euro traders drew the short straw, with Eurozone data showing falling economic confidence, and a reduction in the overall Eurozone inflation rate.

US dollar movement was dominated by trading news; the US currency rose when it was reported that the US and Mexico had agreed to a provisionally-revised trade deal. Less supportive were concerns about the next round of US-Chinese trade tariffs, which experts believe could cause economic pain for manufacturers in both nations.

A key Bank of England (BoE) meeting was held yesterday (Thursday), during which BoE officials discussed whether to adjust interest rates.    Policymakers aren’t expected to change the rate from 0.75%, but could still trigger GBP/EUR and GBP/USD exchange-rate gains, if they hint at a 2019 rate hike.

Another major piece of UK data will be 19th September’s inflation-rate readings for August. If inflation picks up, then sterling could also appreciate, due to greater pressure on the BoE to consider raising interest rates.

The euro could be moved by yesterday’s European Central Bank (ECB) meeting, if, like the BoE officials, ECB policymakers hint at higher interest rates in the future.

Yesterday was also a key meeting for US dollar movement, when key inflation rate figures for August are due out. If the readings show a slowdown, then the US dollar could fall in value, as slower inflation reduces the likelihood of a near-term, Fed interest-rate hike.

At Currencies Direct, we’re here to talk currency whenever you need us, so get in touch if you want to know more about the latest news, or how it could impact your currency transfers.

Since 1996, we’ve helped more than 250,000 customers with their currency transfers. Just pop into your local Currencies Direct branch, or give us a call to find out more.

T: +34 922 971 781

E: canaries@currenciesdirect.com

W: currenciesdirect.com

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Posted by on Sep 14 2018. Filed under Business & Finance. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

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