Staying on top of the latest currency news can help you time your transfers more effectively, so find out what you should be looking out for over the next couple of weeks…
Latest currency news
It’s been a volatile two weeks for the pound, with markets having plenty to react to. GBP/EUR struck a high of €1.1491, but quickly slumped again, reaching a low of €1.1297.
After GBP/USD hit a high of US$1.3453 the pairing swiftly dropped to a low of US$1.3306, although the exchange rate has now recovered much of its losses.
EUR/GBP slumped to £0.8763 after the latest European Central Bank (ECB) meeting, but quickly rebounded to a high of £0.8851. EUR/USD trended somewhat more calmly between a high of US$1.1847 and a low of US$1.1722.
What’s been happening?
There has been plenty on the economic, political and monetary fronts to keep the pound on volatile form these past couple of weeks.
The Bank of England (BoE) opted to keep interest rates frozen at 0.5%. While this was largely expected, the fact not one policymaker voted for another round of tightening showed the BoE was feeling very cautious about the economy indeed.
Markets didn’t have long to dwell on the monetary policy outlook, however, as there was plenty happening with regards to Brexit to keep Sterling volatile.
With the EU having set Friday 8th as the deadline for agreeing issues such as the Brexit divorce bill and the Irish border in order for the European Council to vote in favour of beginning trade negotiations.
It seemed that, after months of fretting over the divorce bill, it could have been the Irish border that derailed the Brexit timetable permanently.
The UK made some concessions, but these were swiftly blocked by Northern Ireland’s DUP, who Theresa May has to keep on side in order to hold a majority in Parliament.
Then, last Friday, the European Council agreed that sufficient progress had been made in talks and that discussions on trade could begin.
Sterling wasn’t happy, however, after many officials warned that this was going to be much harder than the initial phase of talks.
European Commission President Jean-Claude Juncker also soured appetite for the pound after stating that talks on trade wouldn’t start until around March.
After striking a six-month high on the 8th after the Irish border issues were resolved, GBP/EUR quickly tumbled and is now back around the levels seen a fortnight ago.
The euro had hit a one-week low after the latest European Central Bank (ECB) meeting, which gave no new details about when the quantitative easing programme may end.
Policymakers also kept their inflation projections sluggish, despite being upbeat about the Eurozone economy, suggesting monetary tightening is still a long way away.
GBP/USD spiked last week after the Federal Open Market Committee (FOMC) delivered the expected interest rate hike.
Markets had prepared for this, so the move created a good opportunity to sell USD, driving the price lower.
At the same time, the FOMC revised its growth and employment forecasts up – but left its inflation projections unchanged.
What do you need to look out for?
The pace of data and other developments scheduled over the coming days is starting to slow now as the Christmas break approaches, but there will still be some points of interest.
Trading may grow thinner as the days go by, but events such as a speech from BoE Governor Mark Carney on the 20th, US third-quarter GDP on the 21st and personal consumption expenditure figures on the 22nd will ensure things don’t get too calm.
Political developments are likely to cause friction as well. There could still be plenty of developments with regards to Brexit to unsettle the Pound, especially as the Cabinet is today beginning to discuss its aims for the second phase of negotiations.
US President Donald Trump is getting closer to being able to implement his tax reform plans; indications more progress is being made would support USD and weaken EUR.
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