Welcome to Pure FX’s weekly summary + outlook of the interbank exchange rates.
Pound to euro
Sterling holds steady versus the common currency! The pound to euro interbank exchange rate stuck close to 1.12 last week.
The pound held its ground last week, first because there were mixed reports about the Brexit talks. On the one hand, EU chief negotiator Michel Barnier said that talks were 'deadlocked', yet on the other, it's rumoured that Mr. Barnier will soon offer the UK a 2-year transition deal. Meanwhile, UK GDP rose +0.4% in Q3, according to NSIER, faster than Q2, yet below the pre-Brexit trend.
Meanwhile, the euro stood still last week, as the Eurozone economy continued to prosper, yet the European Central Bank (ECB) hinted that it will extend its massive stimulus. In particular, industrial production in the common currency bloc rose by +1.4% in August, a 9-month high. On the other hand though, it's thought that the ECB may extend QE well into 2018, albeit at lower volumes.
What's more, looking ahead, the pound could remain steady versus the euro. This is because, first, UK manufacturing production jumped +2.8% in August, far beyond predictions for +1.9%. This points to vibrant activity in the UK's factories. Yet, just as positively, Germany's exports exploded by +3.1% in August, thumping forecasts for a +1.0% rise. These figures could support the euro.
Pound to Swiss franc
The pound to Swiss franc interbank exchange rate gains! Sterling jumped +0.75 cents against the franc last week, to close to 1.2950.
The franc lost out last week, even though Switzerland's economy shone bright. To start with, Swiss unemployment fell -0.1% in September, to an amazingly low 3.1%. What's more, Swiss producer prices jumped +0.8% in September YoY, above forecasts for +0.6%. This suggests that the Swiss economy may at last be generating higher price pressures, which would lift the franc!
Pound to US dollar
Sterling packs a punch versus the greenback! The pound to US dollar interbank exchange rate jumped +1.5 cents last week, to around 1.33.
The US dollar slumped last week, chiefly because US inflation rose just +1.7% in September year-on-year, -0.1% below forecasts. This puts less pressure on the Federal Reserve to lift interest rates in December, above their current 1.00-1.25%. What's more, this low inflation may lift concerns at the Federal Reserve that weak pressures will be 'persistent', thus weighing on the buck.
That said though, looking ahead, the US dollar may rebound. This is because the US economy remains fighting fit. To start with, US retail sales jumped a mighty +1.6% last month, easily undoing August's -0.1% fall. What's more, US consumer confidence hit its highest since 2004 this month, said the University of Michigan, boding well for future GDP growth. So the buck may bounce back!
Pound to Australian dollar
The pound to Australian dollar interbank exchange rate slides! Sterling dipped -0.75 cents against the Aussie last week, to 1.6875.
The Australian dollar won out last week, first because inflation expectations Down Under jumped to +4.3% this month, from +3.8% in September. This tells us that Australians expect prices to rise faster, which points to buoyant economic growth, and may convince the Reserve Bank of Australia to lift interest rates sooner, above their current all-time low of 1.5%. Hence, the buoyant Aussie!
Moreover, the AU dollar could continue to gain, looking forward. This is because Australia's economy is powering full-steam ahead. For instance, Australian business confidence rose to +7 last month, according to National Australian Bank, above August's +5. What's more, Aussie consumer confidence jumped by +3.6% this month, said Westpac. This may lift the Australian dollar higher!
Pound to New Zealand dollar
Sterling does the high jump versus the kiwi dollar! The pound to New Zealand dollar interbank exchange rate rose +1 cent last week, to 1.86.
The NZ dollar struggled last week, first because New Zealand remains without a government, following its recent election. In particular, New Zealand First party leader Winston Peters said that he needs to consult his party's board, before deciding to work with National or Labour. Meanwhile, New Zealand electronic card sales rose just +0.1% in September, below predictions for +0.7%.
Pound to Canadian dollar
The pound to Canadian dollar interbank exchange rate reaches for the stars! Sterling rose +1.25 cents against the loonie, to close to 1.6625.
The CA dollar lost out last week, first because there are tensions over renegotiating the North America Free Trade Agreement (NAFTA) with the USA and Mexico. If the NAFTA talks falter, Canada's economy may slow. Also, the loonie dollar fell too, as the American Petroleum Institute said that there's a surprise build up in US oil inventories. This cut the price of oil, Canada's biggest export.
What's more, looking ahead, the loonie dollar could continue to sink. This is because, first, Canada's building permits unexpectedly sank -5.5% in August, far beyond forecasts for a -1.0% drop. This tells us that Canada's construction industry is currently on the back foot. In addition, Canada's new housing price index rose just +0.1% in August, below financial market forecasts for +0.3%.
Pound to South African rand
Sterling sinks versus the rand! The pound to South African rand interbank exchange rate declined -2.7% last week, to 17.65, a 1-month low.
The rand took charge last week, largely because South Africa's Supreme Court of Appeal ruled that President Jacob Zuma can face corruption charges. This lifts the odds that Mr. Zuma will lose power, while cutting support for his policies of 'radical economic transformation.' In addition, the rand also rose, as interest rates in South Africa remain at 10.25%, higher than most other nations.
Pound to Japanese yen
The pound to Japanese yen rises! Sterling rose +0.52% against the yen last week, to 148.86.
The yen sank last week, chiefly because the International Monetary Fund's (IMF's) GDP growth outlook for Japan was mixed. On the bright side, the IMF lifted its growth forecast for Japan in 2017 by +0.2%, to 1.5%. Yet less positively, the Fund said that Japan's GDP growth in future would be limited, by a shrinking work force, weak inflation, and higher imports. Hence, the weakening yen!
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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 firstname.lastname@example.org.