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Pound Gains Versus Euro and US Dollar, as ‘No Deal’ Brexit Unlikely

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

Pound to euro

Sterling goes up, up and away versus the common currency! The pound to euro interbank exchange rate soared by +3 cents this week, at one point above 1.16, its highest since May 2017.

The pound wore rocket boosters this week, because it looks likely that the UK will avoid a 'No Deal' Brexit. First, MPs Yvette Cooper and Nick Boles tabled an amendment to extend Article 50, the UK's negotiating window to leave the EU. Second, to ensure Brexit happens, Northern Ireland's DUP looks set to support prime minister May's version of Brexit. So all this has lifted up the pound!

Meanwhile, the euro fell flat this week, as the Eurozone's economy could soon go into reverse. To start with, business activity in the bloc reached just 50.7 in January, according to IHS Markit, close to the 50.0 figure that signals stagnation. As a result, GDP growth is "likely to be weaker than previously anticipated", says the European Central Bank, who've kept interest rates at 0.0%!

Pound to US dollar

The pound to US dollar interbank exchange rate flies! Sterling hopped, skipped and jumped by +3 cents this week, to 1.3150, its highest since early November 2018.

The US dollar has lost its groove this week, first because America's government shutdown continues. The US Federal government has now been shut down for 35 days, as President Trump and Congress argue over funding Mr. Trump's wall at Mexico's border. Moreover, the buck has also fallen, as the USA and China discuss extraditing Huawei executive Meng Wanzhou, accused of fraud in Canada.

Pound to Swiss franc

Sterling goes to infinity and beyond versus the franc! The pound to Swiss franc interbank exchange rate climbed by +2.5 cents this week, to 1.3050.

The franc sank this week, as Swiss National Bank (SNB) chairman Thomas Jordan played up the possibility that Switzerland will keep interest rates very low for the foreseeable future. Speaking to CNN Money Switzerland, Mr. Jordan said that there's "really no need" to hike interest rates above their current -0.75%, given the risk of a 'No Deal' Brexit, and the Eurozone's economic slowdown.

Pound to Australian dollar

The pound to Australian dollar interbank exchange rate flies! Sterling rose by +4.25 cents versus the Aussie this week, to 1.8375, its highest since mid-October.

The AU dollar ran out of petrol by the roadside this week, as Australia's economy disappointed. To start with, Australia shed -3,000 full-time jobs in December, while the labour force participation rate sank by -0.1%, to 65.6%. This bodes ill for the job market Down Under. What's more, new home sales in Australia tanked by -6.7% in December, which may weigh further on house prices.

Pound to New Zealand dollar

Sterling moves on up versus the kiwi! The pound to New Zealand dollar interbank exchange rose by +1.75 cents this week, to 1.9275, close to its highest since early November 2018.

The NZ dollar ran out of puff this week, chiefly because markets are concerned that the global economy will slow in 2019. This may weigh on kiwi GDP growth, as New Zealand is a small, export-orientated economy, and so often influenced by global economic currents. In particular, NZ economic growth may slow, as China, New Zealand's biggest trade partner, is forecast to decelerate again this year!

Pound to Canadian dollar

The pound to Canadian dollar interbank exchange rate goes for gold! Sterling rose by +3.25 cents versus the loonie this week, to 1.7375, close to its highest since late June last year.

The CA dollar fell off its perch this week, as Canada's economy slammed on the brakes. To start with, Canada's manufacturing shipments sank by -1.4% in November, far below forecasts for -0.9%. This bodes ill for Canadian factories. Moreover, Canada's retail sales declined by -0.9% in November, beneath hopes for a -0.6% drop. So Canada's GDP growth may have slowed in Q4 2018!

Pound to Japanese yen

Sterling shoots and scores versus the yen! The pound to Japanese interbank exchange flew up by +1.99% this week, to 143.81, close to its highest since early December.

The yen sank into the swamp this week, as Japan's economy slammed on the brakes. For instance, Japan's exports fell by -3.8% in December compared to a year ago, while imports grew, thus exacerbating Japan's trade deficit. Moreover, Japan's leading economic index fell to 99.1 in November, below October's 99.7, putting to slowdown growth momentum in The Land of The Rising Sun.

Pound to South African rand

The pound to South African rand interbank exchange rate goes in circles! Sterling ended where it began versus the rand this week, at 17.80.

The rand first triumphed this week, as South Africa's inflation reached +4.5% in December year-on-year, in line with forecasts. This will encourage the South Africa Reserve Bank (SARB) to keep interest rates at 6.75%, far higher than in other industrialised countries, and lifting demand for the rand. That said, South Africa's economy may slow, as global growth decelerates, thus putting a ceiling 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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