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Pound Slips Versus Euro and US Dollar, as Brexit Uncertainty Weighs

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 loses its balance versus the common currency! The pound to euro exchange rate fell by -1 cent last week, to 1.1250.

The pound weakened last week, because of continuing Brexit uncertainty. In particular, markets feared that the Conservative Party might initiate a leadership challenge against prime minister Theresa May, at the meeting of the influential 1922 Committee. In the event, Mrs. May emerged unscathed, yet she still faces a struggle to win Parliamentary support for her plans to leave the EU.

Meanwhile, the euro found its feet last week, because European Central Bank (ECB) president Mario Draghi is confident that Eurozone inflation will rise. Speaking in Frankfurt last Thursday, Mr. Draghi said that "underlying inflation is expected to pick up towards the end of the year and to increase further." If so, this may convince the ECB to hike interest rates faster, thus lifting the euro!

Pound to Swiss franc

The pound to Swiss franc exchange rate tumbles! Sterling sank -2 cents versus the Swissie last week, to 1.2825.

The Swiss franc strutted its stuff as a safe haven currency last week, given the global financial wobble. For example, world stock markets sank last week, as money managers feared that the globe's economic growth may start to slow, while US president Donald Trump's trade war with China looms large. In addition, tensions over Saudi Arabia's killing of a journalist also frayed nerves.

Pound to US dollar

Sterling trips over its shoelaces versus the greenback! The pound to US dollar exchange rate dropped by -2.50 cents last week, to just 1.2825.

The mighty buck showed us who's boss last week, as America's economy continues in fine fettle. For instance, US GDP expanded by a rockin' +3.5% between July and September, +0.2% above forecasts, pointing to robust growth. As a result, the Federal Reserve looks even likelier to hike US interest rates again in December, up to 2.5%, the highest in the rich world, thus lifting the dollar!

Pound to Australian dollar

The pound to Australian dollar exchange rate flops! Sterling shed -3 cents versus the Aussie last week, to 1.8075.

The AU dollar got a boost last week, largely because China, Australia's biggest trade partner, unveiled measures to stimulate its economy. In particular, very soon Beijing will cut taxes, and make it easier for banks to lend to private firms. This will stimulate China's appetite to construct, which in turn will lift demand for Australia's iron ore, boosting Australia's GDP growth, and the Aussie too!

Outlook

That said, looking forward, the AU dollar may find itself on the ropes. This is because, as an exporting nation, Australia's fortunes are closely tied to the global economy's. So as the world decelerates, Australia may too, in turn encouraging the Reserve Bank of Australia (RBA) to keep interest rates at 1.5%. Low interest rates mean low returns for investors, thus hurting the Aussie dollar!

Pound to New Zealand dollar

Sterling dives like a submarine versus the kiwi! The pound to New Zealand dollar exchange rate lost out -2 cents last week, to 1.96.

The NZ dollar stood prouder last week, yet may hang its head low in future. This is because New Zealand's trade deficit ballooned to -NZ$1.56 billion in September, its largest on record. This is because New Zealand sold lower volumes of meat and dairy to overseas customers. This tells us that New Zealand is importing far more than it exports, which in turn will slow the kiwi economy.

Outlook

What's more, looking ahead, the kiwi dollar may also fall, because New Zealand is a small, open economy, and so a bellwether for global economic fortunes. As a result, when global stock markets tumble, trade wars brew between the USA and China, and large emerging markets like Brazil look unstable, the NZ dollar may weaken too, as investors look for safe harbour elsewhere!

Pound to Canadian dollar

The pound to Canadian dollar exchange rate spirals downward! Sterling fell by -3 cents versus the loonie last week, to just 1.6825.

The CA dollar put on its cape and flew last week, as the Bank of Canada hiked interest rates by +0.25%, to 1.75%. What's more, Canada's central bank flagged up that it's likely to keep lifting borrowing costs in future, "to achieve the inflation target." Also, the BoC added that the new free trade deal with the USA and Mexico will give confidence to Canada's businesses, and lift growth.

Pound to Japanese yen

Sterling slips versus the yen! The pound to Japanese yen interbank exchange fell by -1.93% last week, to 143.60.

The yen flexed its muscles last week, first as investors turn to Japan as a safe, stable haven from the global stock market downturn. Moreover, the yen also gained, as Japan's Cabinet Office announced that business spending in The Land of The Rising Sun is "robust", while Japan's economy is enjoying an "uptick" in consumption. Also, Japan and China have promised to cooperate more closely, lifting the yen too!

Pound to South African rand

The pound to South African rand exchange rate is put on pause! Sterling ended last week where it began versus the rand, at 18.70.

The rand had mixed fortunes last week, first because, on the bright side, South Africa's inflation jumped by +0.5% in September, above forecasts. This may encourage the South Africa Reserve Bank (SARB) to hike interest rates sooner. Less brightly though, new finance minister Tito Mboweni announced last week that South Africa's public debt will hit 60% by 2024, +4% higher than hoped for.

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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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