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Pound Steady Versus Euro, as EU May Revise May’s Brexit White Paper

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

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

Pound to euro

Sterling stays steady versus the common currency! The pound to euro interbank exchange rate stuck close to 1.13-1.14 last week.

The pound held its ground last week, first because, on the bright side, UK GDP grew by +0.3% in May, said the Office for National Statistics. This tells us that the UK economy has bounced back from the "Beast from The East" cold front in early 2018. That said though, US president Donald Trump said that prime minister Theresa May's planned soft Brexit may "kill" a UK-US trade deal.

Meanwhile, the euro remained in neutral last week, first because Eurozone industrial production expanded by +2.4% in May, +0.3% above forecasts. This suggests that Europe's factories continue to do well, even with president Trump's tariffs on Europe's steel exports. On the other hand though, the European Commission has downgraded its Eurozone growth forecast to just +2.1% in 2018.

Outlook

What's more, looking ahead, the pound to euro interbank exchange rate may continue to tread water. This is because the UK's Brexit plans remain up in the air. In particular, though Theresa May now favours a "soft" Brexit, her plans prompted both Brexit minister David Davis and foreign secretary Boris Johnson to resign. In addition, the EU may force Mrs. May to revise her plans also!

Pound to US dollar

The pound to US dollar interbank exchange rate slides! Sterling sank -1 cent against the greenback last week, to 1.3250.

The US dollar triumphed last week, chiefly because president Trump threatened to hit China with an extra $200bn in tariffs. This has boosted the greenback, because in the event of a global trade war, the US is a vast, self-contained economy, and so likely to withstand best. What's more, the buck also jumped, as US inflation reached 2.9% in June, pointing to faster US interest rate hikes.

Pound to Swiss franc

Sterling moves on up versus the franc! The pound to Swiss franc interbank exchange rate rose by +1 cent last week, up to 1.3250.

The franc weakened last week, first because Switzerland's unemployment fell by just -0.1% in June, to 2.6%, below financial market predictions for 2.5%. Furthermore, the franc also fell, as money managers sold the Swiss franc to invest in America's stock market. This is because it's thought that America will stand up best in a global trade war, while Switzerland acts as a low-returns safe haven.

Pound to Australian dollar

The pound to Australian dollar interbank exchange rate slips over a banana skin! Sterling wobbled -1 cent against the Aussie last week, to 1.78.

The Australian dollar gained last week, though the Aussie dollar's fortunes hang in the balance. This is because the USA has threatened to hit China, Australia's closest trade partner, with an extra $200bn in tariffs. If America imposes these tariffs, China's economy will slow, in turn weighing on Australia's exports. Given this, the Aussie may sink or swim, depending on the USA's decision!

Pound to New Zealand dollar

Sterling struts its stuff versus the kiwi! The pound to New Zealand dollar interbank exchange rate gained +0.75 cents last week, up to 1.9525.

The kiwi dollar ran out of petrol last week, first because New Zealand's business PMI fell to just 52.8 in June, according to Business NZ, below May's 54.4. This tells us that New Zealand's business activity slowed significantly last month, and takes kiwi business momentum closer to the 50.0 point that signals stagnation. As a result, New Zealand's GDP growth could further slow in Q2 2018.

Pound to Canadian dollar

The pound to Canadian dollar interbank exchange rate hangs tight! Sterling hung around 1.74 against the loonie last week.

The Canadian dollar was sleepy last week, chiefly because the Bank of Canada hiked interest rates by +0.25%, to 1.5%. This is because Canada's economy is purring, necessitating the need for higher borrowing costs, to keep a lid on inflation. That said, Bank of Canada governor Stephen Poloz warned of the risks for Canada's future economic growth of US president Trump's trade conflict!

Pound to Japanese yen

Sterling flies versus the yen! The pound to Japanese yen interbank exchange rate climbed by +0.85% last week, to 148.83.

The yen tumbled last week, first because Japan's industrial production rose by just +4.2% in May, -1.8% below financial market predictions. Furthermore, the yen also sank, because Japan's pension funds sold vast quantities of yen to buy foreign stocks, thereby weighing on Japan's currency. Lastly, the yen dropped, as Japan's interest rates remain super-low at just -0.1%.

Pound to South African rand

The pound to South African rand interbank exchange rate tanks! Sterling dived -2.12% against the rand last week, to just 17.53.

The rand stood up to be counted last week, first because South Africa's manufacturing sector unexpectedly rocketed by +2.3% in May year-on-year, far above forecasts for a -0.6% contraction. In particular, South Africa's factories produced higher quantities of motor vehicles and durable consumer goods. This has raised hopes that South Africa will avoid a recession, thus boosting the rand.

Outlook

That said though, the rand's gains could be short-lived. This is because South Africa's vital agricultural and mining sectors have gone into reverse this year. What's more, hopes that newly-elected president Cyril Ramaphosa could quickly transform South Africa's economy and restore investor confidence have so far been dashed. As a result, the springbok economy may slow, weighing on the 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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