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Sterling Flip-Flops Versus Euro, as Brexit Negotiations Up-in-The-Air

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 flip-flops versus the common currency! The pound to euro interbank exchange rate wobbled between 1.1325 to 1.1425 last week.

The pound flew high then fell low last week, because the outlook for Brexit is unclear. On the one hand, UK Brexit secretary Dominic Raab said that a deal is yet to be reached, because the UK and EU continue to debate Northern Ireland's border. More brightly though, UK prime minister Theresa May remains optimistic that a deal will be agreed, ahead of the deadline in early March next year!

Meanwhile, the euro wandered to and fro last week, first because Italy and the EU remain at loggerheads over Italy's budget. Recently, Italy's prime minister Giuseppe Conte called his budget "beautiful", yet EU head-honcho Pierre Moscovici warned that it's in violation of deficit rules, and significantly risks elevating Rome's borrowing costs. So this conflict has weighed down the euro!

Outlook

Moreover, looking forward, sterling could continue to swim then sink versus the euro. This is because the UK's economic data has been lukewarm. More brightly, UK wage growth reached +3.1% in the 3 months to August, the most in close to a decade. This will give Britons more cash to splash. Yet on the other hand, UK retail sales fell by -0.8% last month, as consumers bought less food!

Pound to Swiss franc

The pound to Swiss franc exchange rate goes in circles! Sterling ended last week close to where it began versus the Swissie, around 1.30-1.3025.

The Swiss franc first gained last week, because reports that Saudi Arabia may have killed journalist Jamal Khashoggi have inflamed global political tensions. This lifted the franc, as a reliable, safe haven currency in moments of uncertainty! That said though, the franc's gains were moderated, as Switzerland's trade surplus fell to +Fr2,434 billion in September, below financial market hopes.

Pound to US dollar

Sterling slips on a banana skin versus the greenback! The pound to US dollar exchange rate fell -0.75 cents last week, to 1.3075.

The mighty buck stood taller last week, first because America's central bank, the Federal Reserve, said that it's likely to lift US interest rates again, in the minutes of its latest meeting. In particular, the Fed “anticipated that further gradual increases [in interest rates] would most likely be consistent” with strong economic growth. So the Fed may hike to 2.5% as soon as December!

Outlook

That said though, looking forward, the US dollar's outlook is up-in-the-air. This is because, first, American stock market indexes like the S&P500 are falling, as investors think that the USA's trade war with China may slow GDP growth. This may weaken the US dollar, as money managers buy fewer dollars to buy US stocks. Equally though, the buck may rise, as an economic safe haven!

Pound to Australian dollar

The pound to Australian dollar exchange rate goes off a cliff! Sterling fell by -0.75 cents versus the Aussie last week, to 1.8375.

The AU dollar rocketed last week, first because Australia's unemployment rate fell by -0.3% in September, to just 5.3%. Aussie joblessness fell last month, as Australia created a healthy 20,300 new full-time jobs. Furthermore, the Aussie also rose, as prices of iron ore, Australia's biggest export, jumped by +1.5% last week. This is because China has limited output at its steel mills, to boost air quality.

Pound to New Zealand dollar

Sterling goes into reverse versus the kiwi! The pound to New Zealand dollar exchange rate sank -3 cents last week, to just 1.9850.

The NZ dollar raised its fist to the air last week, because New Zealand's inflation jumped to +1.9% between July to September, above forecasts for +1.7%. This tells us that New Zealand's economy is generating higher price pressures than anticipated, buoyed by a +5.5% rise in fuel prices. In turn, this may convince the Reserve Bank of New Zealand (RBNZ) to hike interest rates sooner, above their current 1.75%!

Pound to Canadian dollar

The pound to Canadian dollar interbank exchange rate goes on a rollercoaster! Sterling went all over the map versus the loonie last week, to arrive at 1.7125.

The CA dollar made gains then lost out last week, because Canada's economic data disappointed, yet the Bank of Canada (BoC) still looks set to lift interest rates again soon. For instance, Canada's retail sales fell by -0.1% in August, while manufacturing shipments dipped by -0.4% too. That said, there's still a 96.95% chance that the BoC will hike above 1.5%, to put a lid on rising Canada prices.

Pound to Japanese yen

Sterling backs and forths versus the yen! The pound to yen interbank exchange ended up where it started last week, at 147.25-147.50.

The yen initially had lift-off last week, because there was a sell-off on global stock markets, while political tensions rose following journalist Jamal Khashoggi's murder. This benefited the yen, as a safe haven in times of world turbulence. The Japanese yen then shed its gains though, as Bank of Japan governor Haruhiko Kuroda said that interest rates would stay "very low" for the foreseeable future.

Pound to South African rand

The pound to South African rand exchange rate loses its cool! Sterling fell by -1.62% against the rand last week, to 18.75.

The rand strengthened last week, first because South Africa's retail sales rose by +2.5% in August compared to a year ago, above predictions for a +1.3% rise. In addition, the rand trended higher, as credit rating agency Moody's delayed its review of South Africa's debt rating. This has been taken as a good sign for South Africa's trustworthiness to pay its debts, thus lifting 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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