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Pound Flies Higher Versus US Dollar, as America’s Inflation Eases

Welcome to Pure FX’s weekly summary plus outlook of the interbank exchange rates. This tells you what’s affected the exchange rates this week, and what may happen next, for your money transfer!

Pound to euro

Sterling sticks to its guns versus the common currency! The pound to euro interbank exchange rate stayed close to 1.12-1.1250 last week.

The pound held steady last week, because there was mixed news about the UK's Brexit talks. On the bright side, the EU's chief Brexit negotiator Michel Barnier said that a Brexit deal is possible within "6 to 8 weeks". On the other hand though, Bank of England governor Mark Carney repeated his warning that the risks of a "No Deal" Brexit are uncomfortably high, so holding down sterling!

Meanwhile, the euro wobbled last week, as the European Central Bank (ECB) made a cloudy forecast for the Eurozone. In particular, the ECB cut its 2018 growth outlook for the currency bloc by -0.1%, to just +2.0%, as trade uncertainty weighs on sentiment. More positively though, the ECB is still on course to end its vast stimulus in December, boding well for Europe's financial health!

Pound to US dollar

The pound to US dollar interbank exchange rate jumps! Sterling climbed by +1.5 cents versus the greenback last week, to 1.3075.

The US dollar lost out last week, first because America's inflation rose below forecasts. To be specific, US price pressures expanded by just +2.7% in August, -0.2% beneath predictions. This suggests that the US economy remains sluggish to push up prices, and may lead the Fed to hike interest rates more slowly. Also, the buck sank, as US retail sales rose by just +0.1% in August.

Outlook

That said though, looking ahead, the outlook for the US dollar is distinctly up-in-the-air. This is because it's all to play for in US president Donald Trump trade wars. For example, Mr. Trump has threatened to impose tariffs on all $467 billion of China's imports to the USA, yet he's also invited Beijing to settle the dispute. As a result, the US economy may sink or swim in future, and the dollar too!

Pound to Swiss franc

Sterling flies higher versus the Swissie! The pound to Swiss franc interbank exchange rate climbed by +1.25 cents last week, up to 1.2650.

The franc sank last week, because there was less demand for Switzerland as a safe haven from global political headwinds. First, US president Trump called China to resume their trade dispute, lifting financial market optimism. In addition, Italy's populist government said that they'd obey Brussels' fiscal spending rules, buoying sentiment too. So this good global news weighed down the franc!

Pound to Australian dollar

The pound to Australian dollar interbank exchange rate stays still! Sterling ended last week where it began versus the Aussie, around 1.8275.

The Aussie dollar stayed in neutral last week, because Australia's economic outlook looks overcast. On the sunny side, Australia created a bumper +44,000 new jobs in August, far above forecasts for +15,000 roles. This tells us that Australian companies are hiring workers at a blistering pace. That said, the Aussie wavered, as there's still lots of problems in emerging markets, like South Africa, Turkey and Argentina!

Pound to New Zealand dollar

Sterling climbs a notch versus the kiwi! The pound to New Zealand dollar interbank exchange jumped +1.25 cent last week, up to 1.9950.

The New Zealand dollar declined last week, because there's a growing crisis in emerging markets, like South Africa and Turkey. Like New Zealand, these emerging markets export lots of commodities, such as minerals, fruit and timber. As a result, global money managers often treat New Zealand as a proxy for these emerging markets. With this in mind, the kiwi dollar has lost out!

Pound to Canadian dollar

The pound to Canadian dollar remains calm! Sterling floated between 1.70-1.7050 against the loonie dollar last week.

The CA dollar played sleeping lions last week, because there was mixed progress about the NAFTA free trade deal. On the bright side, Canada agreed to widen access to its dairy sector to America, thus lifting the odds of a deal. That said though, Canada and the USA continue to negotiate a deal for their automobile sectors, with the NAFTA deadline nearing. So this pressure has hurt the CA dollar!

Outlook

Moreover, looking forward, the Canadian dollar could continue to tread water. This is because, on the optimistic side, the price of crude oil, Canada's biggest export, climbed by +1.6% last week, to $70.37. This bodes well for Canada's GDP growth over the Autumn. Yet less brightly, Canada's capacity utilisation reached just +85.5% in Q2, below forecasts for +86.9%, which may hurt the loonie!

Pound to Japanese yen

Sterling rockets upward versus the yen! The pound to Japanese yen interbank exchange rate climbed by +2.36% last week, to 146.69.

The yen lost out last week, because Japan's economy is struggling to gain momentum. For instance, Japan's industrial production unexpectedly slid by -0.2% in July, beneath forecasts for a -0.1% fall. What's more, Japan's government recently downgraded its outlook for Japanese exports for the 1st time in 3 years. As a result, Japan's GDP growth may weaken in Q3, thus hurting the yen!

Outlook

Furthermore, looking forward, the yen could continue to sink. This is because, first, The Land of The Rising Sun has recently been hit by a series of natural disasters. For instance, massive flooding killed 220 in western Japan in July, while a typhoon recently hit Osaka. This will slow Japan's economic momentum. Also, US president Trump is threatening to hit Japan with tariffs, also hurting the yen!

Pound to South African rand

The pound to South African rand interbank exchange rate slides! Sterling dived -1.36% against the rand last week, to 19.45.

The rand strutted its stuff last week, because South Africa's economy showed unexpected signs of life. For instance, South Africa's manufacturing production expanded by +2.9% in July year-on-year, far ahead of hopes for a +1.1% gain. In addition, South Africa's retail sales blossomed by +1.3% in July compared to 12 months ago, well ahead of June's +0.7% gain. Thus the sturdier rand!

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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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