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Pound Falls Versus Euro and US Dollar, as Brexit Up-In-The-Air

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

This tells you what’s affected the exchange rates in the past week, plus what may happen next, for your money transfer!

Pound to euro

Sterling sinks versus the common currency! The pound to euro exchange rate fell -0.5 cents last week, to 1.1125.

The pound weakened, chiefly because of Brexit uncertainty. First, UK prime minister Theresa May was challenged in a 'No Confidence' vote. Then, although Mrs. May won her confidence vote, the EU offered no new concessions to sweeten the UK's draft Brexit deal. This has raised fears that the UK may crash out of the EU in March next year without a deal, thereby weighing on sterling!

Meanwhile, the euro strutted its stuff last week, as the European Central Bank (ECB) at last ended its vast stimulus program. For the last several years, the ECB has pumped trillions of euros into the Eurozone's financial system, to stimulate growth and inflation. Now though, ECB chief Mario Draghi has determined that Europe's economy can stand on its own 2 feet, thereby lifting the euro!

Outlook

That said though, looking ahead, the pound to euro exchange rate is up-in-the-air. This is because it's thought that UK prime minister May will "run down" the Brexit clock, by offering MPs a vote on her draft deal only close to the March deadline. This will put pressure on the House of Commons to support Mrs. May's deal, though in the meantime, it adds to uncertainty for businesses and investors!

Pound to US dollar

The pound to US dollar exchange rate slides! Sterling fell -1.5 cents versus the greenback last week, to 1.2575.

The US dollar triumphed last week, first because the number of Americans claiming unemployment benefits for the 1st time fell to a 49-year low. To be specific, just 206,000 US citizens claimed initial jobless benefits last week, -27,000 fewer people than the week before, and the lowest figure since 1969. This will encourage the Federal Reserve to hike interest rates next week, up to 2.75%!

Outlook

What's more, looking ahead, the US dollar could continue to climb against the pound. This is because the USA and China now look likelier to sign a trade deal. First, China said last week that it will cut its tariffs on US vehicles to 15% from 40%. Also, US president Trump said that he may intervene to release Chinese Huawei executive Wanzhou Meng, who's accused of breaking US sanctions on Iran.

Pound to Swiss franc

Sterling slips versus the Swissie! The pound to Swiss franc exchange rate fell by -0.5 cent last week, to 1.2550.

The franc flew higher last week, first because Switzerland's unemployment rate fell by -0.1% in November, to just 2.4%. This tells us that Switzerland's job market remains red hot. What's more, last week the Swiss National Bank (SNB) unexpectedly held interest rates at -0.75%, above forecasts for a cut to -1.25%. This makes it more profitable to invest in Switzerland, lifting the franc!

Pound to Australian dollar

The pound to Australian dollar wobbles! Sterling sank by -2.5 cents versus the Aussie last week, to 1.7525.

The Australian dollar flexed its muscles last week, largely because the USA and China look closer to signing a new free trade agreement. To start with, China has started to buy vast quantities of American soy beans, according to president Trump last week, boding well for a full agreement in 2019. Australia trades closely with both superpowers, so a trade deal will lift Australia's GDP too!

Outlook

That said, looking forward, the Australian dollar may flounder. This is because economists are warning of risks for Australia's economy in 2019. In particular, it's possible that Australia's housing market will suffer a "hard landing" next year, reckons the OECD. Given this, the Reserve Bank of Australia may hold interest rates at just 1.5% next year, thereby weighing on the Aussie dollar!

Pound to New Zealand dollar

Sterling loses out versus the kiwi! The pound to New Zealand dollar sank by -0.75 cents last week, to 1.8475.

The New Zealand dollar reached poll position last week, because the kiwi government reported healthy news for New Zealand's public finances. In particular, New Zealand's national debt is now forecast to fall to just 19% by 2021, below forecasts, and among the lowest in the developed world. In addition, New Zealand's budget surplus is forecast to rise up to a mighty NZ$8.4 billion too!

Pound to Canadian dollar

The pound to Canadian dollar exchange rate makes like a lemming and dives! Sterling declined by -1.25 cents versus the loonie last week, to 1.6825.

The CA dollar put on its cape and flew last week, because Canada started to build 218,000 new homes in November, +20,000 higher than forecast. In particular, this is because construction companies began building many new homes in Vancouver. What's more, more widely, Canada's building permits fell by just -0.2% in November too, lower than forecast, thus bolstering the Canadian dollar!

Pound to Japanese yen

Sterling sinks into the swamp versus the yen! The pound to yen exchange rate sank by -0.55% last week, to 142.54.

The yen stood on stilts last week, because Japan's economy beat forecasts. To start with, Japan's large industrial investment index jumped to +14.3% between October and December, beating predictions for +12.7%. This will lift Japan's economic growth next year. What's more, Japan's "Economy Watchers" survey moved on up to 51.0 last month, above predictions for a contraction to 49.5.

Pound to South African rand

Sterling climbs the ladder versus the rand! The pound to South African rand exchange rate rose by +0.38% last week, to 18.11.

The rand ran out of petrol last week, because there are renewed worries about South Africa's economy. For instance, it's feared that major credit rating agencies may cut South Africa's rating to Junk next year. If so, this will significantly lift South Africa's borrowing costs, and public debt. What's more, there are continuing interruptions in South Africa's power supply, thus hurting 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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