Pound bounces back

STAYING on top of the latest currency news can help you time your transfers more effectively, so find out what you should be looking out for over the next couple of weeks.

During the past fortnight, the GBP/EUR exchange rate has climbed sharply higher, rising from a low of around 1.0968 euros, to a high in the region of 1.1394.

This means EUR/GBP has slumped from around £0.9121 to a ten-week low of around £0.8776. EUR/USD has also weakened, trending in the region of US$1.2037 two weeks ago, but then falling to around US$1.1864 this week.

There has, of course, been a lot going on recently to keep the currency markets occupied. It’s been a busy period for UK politics with Foreign Secretary Boris Johnson causing a stir, after re-awakening the controversial claim that Brexit will free up £350 million per week to spend on the NHS.

Theresa May also delivered a speech on the UK’s approach to Brexit recently, but markets were disappointed with the lack of clarity it provided.

Meanwhile, the US dollar has been weakened by political concerns, but strengthened by an improving outlook upon US interest rates.

Military tensions between the US and North Korea continue to escalate. President Donald Trump shocked the United Nations in his first address to the organisation, by claiming the US may be forced to “totally destroy” North Korea, in defence of itself or its allies. North Korea responded by threatening to test a hydrogen bomb in the Pacific Ocean.

On the other hand, the US Federal Reserve has stated that it will start to trim the balance sheet from next month, and also indicated that it might raise interest rates one more time during 2017.

The euro has been undermined by the approach of the German Federal Elections, which saw Angela Merkel retain her majority, but lose her coalition partners the Social Democrat Party (SPD), meaning that there could be weeks of negotiations as she tries to form a coalition with minor parties.

As well as the usual slew of inflation, growth and retail data to which the pound, euro and US dollar will all respond strongly, there are plenty of speeches in the coming days from central bankers.

Bank of England (BoE) Governor Mark Carney, European Central Bank (ECB) President Mario Draghi and Federal Reserve Chair Janet Yellen are all giving public addresses this week. Should they mention the outlook for monetary policy, the pound, euro or US dollar respectively could react strongly.

Markets will be particularly interested in the UK services PMI, which is set for release on Wednesday, October 4th. Alongside the concurrent composite index, this will be the last PMI release covering the month of September, meaning economists will have access to all the business surveys for the third quarter.

This means analysts will be able to make reasonable estimates for the pace of UK economic growth during Q3. Signs of an uptick from Q2 will sharply boost the pound, while indications that growth is weakening again could send GBP tumbling.

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 150,000 customers with their currency transfers; just pop into your local Currencies Direct branch, or give us a call to find out more.

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Posted by on Sep 29 2017. 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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