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GBP Goes On Rollercoaster Versus EUR and USD, On Brexit Deal Doubts

by Peter Lavelle

Welcome to Pure FX’s weekly summary plus outlook of the interbank exchange rates.

This tells you what’s affected the exchange rates in the last week, and what may happen next, for your money transfer!

Pound to euro

Sterling hits stormy waters versus the euro! The pound to euro exchange rate jumped as much as +1 cent last week, up to 1.1504, its highest since April 18th, though it closed at 1.1412.

The pound to euro exchange rate first flew up, because UK GDP expanded by +0.6% between July to September, said the Office for National Statistics (ONS) last week. This is the fastest in close to 2 years, buoyed by the hot Summer weather plus the World Cup. That said, sterling shed its gains, as newspaper including The Times reported that Theresa May's Brexit deal is on "life support"!

Meanwhile, the euro wobbled last week, because Germany's exports unexpectedly fell by -0.8% in September, said Statistiches Bundesamt Deutschland, below hopes for a +0.3% rise. This has fuelled fears that Germany's economy may have shrunk in Q3. Also, the euro lost out, as the European Commission cut Italy's growth forecast, raising tensions over Rome's deficit plans for 2019.

Outlook

What's more, looking ahead, sterling could pick up its winning streak versus the euro. This is because, first, UK retail sales expanded by +1.3% in October compared to a year ago, said the British Retail Consortium, far beyond September's -0.2% fall. This suggests that British shoppers may continue to fuel growth in Q4. That said, much depends on the UK getting a good Brexit deal too!

Pound to US dollar

The pound to US dollar exchange rate tanks! Sterling flopped by -1.17% versus the greenback over the course of last week, to 1.2868.

The US dollar kissed the sky last week, as there was upbeat news from America. First, the Democrats won the House of Representatives, at America's mid-term elections. This boosted the buck, because this will limit president Trump's power to make sweeping changes, thus encouraging investors to buy American assets. Also, the Fed remain on course to lift interest rates to 2.5% next month!

Outlook

That said, looking ahead, sterling could fly higher versus the buck. This is because president Trump tweeted recently that he's close to reaching a "good deal" with China over trade. If so, this will encourage money managers to sell assets in America, which is considered a safe haven in times of economic uncertainty, in favour of "riskier" assets. In turn, this may weigh on the US dollar!

Pound to Swiss franc

Sterling sinks into the swamp versus the Swissie! The pound to Swiss franc exchange rate fell by -0.68% last week, to 1.2973.

The franc made mighty gains last week, yet may fall, looking ahead. This is because the Swiss government and the Swiss National Bank (SNB) agreed that franc remains "highly valued". This lifts the odds that the Swiss National Bank will keep interest rates at all-time lows of -0.75%. Also, the SNB warned that "the risk of a worsening international situation has increased", which may hurt Switzerland's exports.

Pound to Australian dollar

The pound to Australian dollar exchange rate calls an S.O.S! Sterling fell -1.22% versus the Aussie last week, down to 1.7865.

The Australian dollar triumphed versus sterling last week, chiefly because China, Australia's closest trade partner, perked up. In particular, China's exports ballooned by a mighty +15.6% in October, said the National Bureau of Statistics of China, far beyond predictions for +11.0%. This suggests that China's economy remains resilient, in spite of US president Trump's trade tariffs!

_Outlook _

What's more, looking forward, the AU dollar could continue to climb versus sterling. This is because, even though the Reserve Bank of Australia (RBA) held interest rates at 1.5% last week, the RBA is increasingly confident about Australia's GDP outlook. In particular, Australia's central bank said that Australia's economy is "performing well", while joblessness looks set to fall even further!

Pound to New Zealand dollar

Sterling makes like a lemming and dives versus the kiwi! The pound to New Zealand dollar exchange rate tumbled by -2.08% last week, to 1.9139.

The NZ dollar strutted its stuff last week, chiefly because New Zealand's unemployment rate surprisingly fell by -0.6% from July to September, to just 3.9%, said Statistics New Zealand. This is new Zealand's lowest jobless rate since June 2008, in the midst of the global financial crisis. So this greatly cuts the odds that Reserve Bank of New Zealand will cut interest rates below 1.75%!

Pound to Canadian dollar

The pound to Canadian dollar exchange rate slips! Sterling lost out -0.46% versus the loonie last week, to 1.6972.

The CA dollar climbed last week, yet may weaken in future. This is because, at America's mid-term elections, the Democratic Party won the US House of Representatives. As a result, president Trump may find it tougher to pass tax cuts to accelerate US economic growth, which may hurt Canada, as America's closest trading partner. So the Democrats' victory may weigh down the loonie!

Pound to Japanese yen

The pound to Japanese yen interbank exchange rate dives! Sterling fell by +0.41% versus the yen last week, to 146.77.

The yen triumphed last week, yet may soon fall, as Japan's recent economic data has disappointed. For instance, Japan's machinery orders crashed by -7.0% in September, far below forecasts for a +7.0% rise. What's more, Japan's overall household spending dipped by -1.6% in September, beneath hopes for a +1.6% jump. So this will slow Japan's economy in Q3, and weigh down the yen!

Pound to South African rand

Sterling goes back and forth versus the rand! The pound to South African rand exchange rate ended last week where it started, at 18.58.

The rand fell asleep last week, because South Africa's economic outlook turned distinctly cloudy. To start with business confidence in South Africa rose to 95.8 in October, easily above September's 93.3. This will fuel SA business investment, and GDP growth too. On the other hand though, South Africa's manufacturing production increased by just +0.1% in September, below hopes for +1.7%!

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Please bear in mind, this article is Pure FX’s opinion only and does not constitute advice. Moreover, the exchange rates referred to in this article are the interbank rates, which are the rates at which banks and financial institutions buy and sell currency to each other. Therefore these exchange rates cannot be accessed by individuals or SMEs, and are not the same rates that Pure FX can offer. To get a free exchange rate quote, call us on +44 (0) 1494 671800, or email peter.lavelle@purefx.co.uk.

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