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Sterling Edges Higher Versus Euro, as UK Agrees Brexit Deal

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 leaps versus the common currency! The pound to euro exchange rate rose by +0.25 cents last week, to 1.1275.

The pound gained last week, first because UK prime minister Theresa May reached a deal for the UK's exit from the EU. The deal includes a transition period for businesses, and the outlines of a future trade agreement. This lifted hopes for the UK's economic outlook after Brexit! Also, sterling flew, as the UK's factory output hit +10 this month, said the CBI, trashing forecasts for -7.

Meanwhile, the euro sank last week, because the Eurozone's economic engine continued to cough and splutter. Output in the currency bloc's services, manufacturing and construction fell to 52.4 in October, above the 50.0 figure that signals growth, yet the lowest since late 2014. This suggests that the Eurozone may expand a measly +0.2% between October and December, hurting the euro!

Outlook

That said, looking ahead, sterling's forecast versus the common currency is cloudy. This is because, even though prime minister May has agreed a Brexit deal with the EU, the agreement must still be passed by Parliament. It's thought that up to 100 Tory MPs could vote down the deal at present, thus putting pressure on Mrs. May to convince her MPs. This pressure may weigh on the pound!

Pound to Swiss franc

The pound to Swiss franc exchange rate slips! Sterling eased by -0.5 cents versus the franc last week, to 1.2775.

The Swiss franc triumphed last week, chiefly because Switzerland's economic data exceeded expectations. For instance, Switzerland's industrial production leapt by +1.4% in Q3 compared to a year ago, buoyed by higher chemicals and pharmaceutical output. In addition, Switzerland's trade surplus ballooned to +Fr3,748m in October, as Swiss export growth reached a 2-year high.

Pound to US dollar

Sterling goes in circles versus the greenback! The pound to US dollar exchange rate ended up where it started last week, at 1.2825.

The buck stalled last week, because America's economic performance was distinctly up-and-down. On the bright side, existing home sales States-side rose by +1.4% in October, beating forecasts for +1.0%. Yet equally, US durable goods orders, such as washing machines and aircraft, tumbled by -4.4% in October, well below forecasts for -2.5%, while consumers felt less downbeat also.

Outlook

Moreover, looking ahead, sterling could continue in a stalemate versus the greenback. This is because, first, oil prices have fallen, as US shale production rises. This may weaken the greenback, as oil is priced in US dollars, so when oil is cheaper, international customers buy fewer dollars to purchase the black gold! That said, if the USA reaches a trade deal with China, the buck may rise.

Pound to Australian dollar

The pound sprints versus the Aussie! Sterling rose by +2.5 cents against the Australian dollar last week, to 1.7650.

The Australian dollar gasped for breath last week, first because global stock markets fell, fuelled by fears that world economic growth has peaked. This weighed on the Aussie, as a "riskier" commodity currency. Also, the AU dollar tumbled, as ANZ forecast that Australia's house prices will crash by -20% in 2019, which in turn will force the Reserve Bank to keep interest rates at 1.5%.

Pound to New Zealand dollar

Sterling flies up, up and away versus the kiwi! The pound to New Zealand dollar exchange rate rose by +1.5 cents last week, up to 1.8850.

The NZ dollar fell flat on its back last week, first because global production of dairy, New Zealand's biggest export, hit an all-time high. This caused dairy prices to fall by -1.8% at the latest Globaldairytrade auction, meaning that kiwi farmers will make less money from selling the white stuff overseas! In turn, the RBNZ may feel pressure to keep interest rates at 1.75% for longer.

Pound to Canadian dollar

The pound to Canadian dollar exchange rate heads higher! Sterling climbed +0.5 cent versus the loonie last week, to 1.6950.

The CA dollar ran out of puff last week, chiefly because the price of oil, Canada's biggest export, crashed lower. Brent crude has fallen to $60 a barrel, down -28% since early October, and its lowest in 13 months. This is because the USA has allowed exemptions to its sanctions on Iran, thus lifting the global oil supply, and cutting its price. In turn, this weighs on Canada's oil profits too!

Outlook

On the other hand though, the Canadian dollar may rise, looking ahead. This is because Canada's retail sales flew higher by +0.2% in September, said official data last week, beating forecasts for a +0.1% rise. What's more, Canada's inflation soared to +2.4%, far above the Bank of Canada's 2.0% target, thus lifting the odds that the BoC will continue to hike interest rates above 1.75%!

Pound to Japanese yen

The pound to Japanese yen exchange rate goes backwards and forwards! Sterling ended last week where it started versus the yen, around 144.50-145.00.

The yen hung tight last week, first because, on the bright side, Japan's Cabinet Office forecast that the economy of The Land of The Rising Sun will continue to grow "moderately". That said though, the Bank of Japan looks set to keep interest rates at all-time lows of -0.1%, while buying vast quantities of government bonds, as Japan's inflation hit just 1.4% in October, below target.

Pound to South African rand

Sterling slips versus the rand! The pound to South African rand exchange rate dived by -1.2% last week, to 17.62.

The rand triumphed last week, because South Africa's inflation rose by +0.2% in October, up to 5.1%. This prompted the South Africa Reserve Bank (SARB) to lift interest rates for the 1st time since 2016, up to 6.75%, far higher than other industrialised countries. This will ease price pressures in the springbok nation. Also, higher interest rates will support the value of the rand in future!

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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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