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Pound Hits 11-Month High Versus Euro, as BoE’s McCafferty Signals Hike

Image credit: Oliver Gibbs

by Peter Lavelle

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

This tells you what’s affected the exchange rates in the last week, and what may happen, looking ahead!

Pound to euro

Sterling rockets versus the common currency! The pound to euro interbank exchange rate jumped +1 cent last week, to 1.1575, its highest since May 23rd last year.

The pound put its skates on last week, first because UK retail sales climbed by +1.4% in March year-on-year, said the British Retail Consortium, above forecasts for +0.7%. Furthermore, sterling also reached poll position, as Bank of England policymaker Ian McCafferty said that the BoE 'shouldn’t dally when it comes to tightening policy modestly.' This points to a May hike to +0.75%!

Meanwhile, the euro lost out last week, first because Germany's exports unexpectedly fell -3.2% in February, well below predictions for a +0.2% rise. This suggests that the Eurozone's powerhouse is being hit by global trade uncertainty. In addition, the euro sank, as the European Central Bank said that the strong euro is a 'significant source of uncertainty', in its latest minutes.

Pound to Swiss franc

The pound to Swiss franc interbank exchange rate flies! Sterling jumped +2 cents against the franc last week, to 1.3725, its highest in 22 months.

The franc weakened last week, chiefly because fears of a global trade war eased. In particular, US President Trump called China's leader Xi Jinping his 'friend', reducing fears of tariffs between the world's 2 largest economies. In addition, Mr. Trump signalled that he'd like to re-enter a re-worked Trans-Pacific Pact. So this good news cut demand for safe haven currencies like the franc!

Pound to US dollar

Sterling shoots up versus the greenback! The pound to US dollar interbank exchange rate climbed +1.5 cents last week, to 1.4250, close to its highest since the Brexit vote.

The US dollar tripped over last week, because even though the Federal Reserve thinks that America's economy is set to accelerate, said the Fed's latest minutes, the USA's central bank is also concerned about President Trump's proposed tariffs. As a result, markets remain unsure whether the Fed will hike interest rates 2 or 3 more times in 2018, thus weighing on the mighty buck!

Pound to Australian dollar

The pound to Australian dollar interbank exchange rate stays steady! Sterling held between 1.83-1.8350 against the Aussie last week, still close to its highest since late-June 2016.

The Australian dollar held its ground last week, first because business confidence Down Under fell to +7 in March, said NAB. In particular, Aussie firms felt less bullish, as US President Trump talked up the possibility of tariffs. Yet on the other hand, China's imports jumped by +14.4% in March, well above forecasts. This benefited the AU dollar, as China is Australia's closest trade partner.

Pound to New Zealand dollar

Sterling plays dead lions with the kiwi! The pound to New Zealand dollar interbank exchange rate ended last week where it started, close to 1.9350-1.94.

The New Zealand dollar stood still last week, first because, on the bright side, kiwi electronic card sales rose by +1.0% in March, +0.5% above forecasts. In addition, the NZ dollar also rose, as US President Trump hinted that he may not launch military strikes on Syria, thus benefiting 'riskier' commodity currencies like the kiwi. That said though, NZIER business confidence hit -11% in Q1.

Pound to Canadian dollar

The pound to Canadian dollar interbank exchange rate slips! Sterling dived -0.25 cents against the loonie last week, to 1.7975.

The loonie dollar strengthened last week, first because the Bank of Canada said that CA businesses remain optimistic about sales growth, even with trade tensions. What's more, the price of oil, Canada's biggest export, hit a 3-year high last week, at over $67 a barrel. In addition, the CA dollar also climbed, as Canada's housing starts reached 225k in March, +7k above predictions!

Pound to Japanese yen

Sterling goes it infinity and beyond versus the yen! The pound to Japanese yen interbank exchange rate rose by +1.89% last week, to 153.02, close to its highest since the vote for Brexit.

The yen spun on its wheels last week, first because it's thought that Japan's GDP stagnated for the 1st time in 2 years between January and March, said a Reuters poll. In particular, 'consumer spending and industrial production likely weakened during the period due to the cold weather and higher vegetable prices,' reckons Dai-Chi economist Yoshiki Shinke. So this dragged down the yen!

Outlook

What's more, looking ahead, the yen could continue to lose out. This is because, first, trade tensions between the USA and China have eased, following President Trump's latest tweets. This may drag down the yen, as peaceful global political news encourages investors towards 'riskier' currencies. In addition, the yen could fall, as Japan is sceptical of the USA's talk of rejoining the TPP trade pact.

Pound to South African rand

The pound to South African rand interbank exchange rate climbs! Sterling rose by +0.41% against the rand last week, to 17.21, close to a 4-month high.

The rand slumped last week, first because South Africa's manufacturing rose by just +0.6% in February compared to a year ago, disappointing hopes for a +2.6% jump. This highlights the challenges that new president Cyril Ramaphosa faces to accelerate South Africa's GDP growth. In addition, the rand also dived, as South Africa remains vulnerable to talk of tariffs between the USA and China.

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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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