Currency Update from ´Currencies Direct´

  • Pound struggling, euro steady, US dollar bounces back

    Latest currency news

    A few key factors have been driving pound, euro and US dollar exchange rates over the last month – with central bank monetary policy speculation and political uncertainty being the two main ones.

    Over the past four weeks the GBP/EUR exchange rate has fallen from highs of €1.1432 to historic lows of €1.1035, GBP/USD peaked at $1.3256 before drifting to $1.3020 and EUR/USD advanced from $1.1385 to highs of $1.1900.

    What’s been happening?

    While the Federal Reserve piled pressure on the US dollar by dwelling on low US inflation (leading many to suspect that the central bank will refrain from increasing interest rates for a third time in 2017) the Bank of England (BoE) sent the Pound reeling with its own interest rate decision.

    The BoE sent the pound to a 10-month low against the euro and drove GBP/USD from an 11-month high. While the bank was split 6-2 on whether or not to increase interest rates, its decision to slash UK growth forecasts for 2017 and 2018 was enough to dash hopes that borrowing costs would be increased soon and Sterling spiralled lower in the wake of the announcement.

    A lack of progress in the UK’s Brexit negotiations also limited the pound’s appeal.

    Meanwhile, the euro was supported by a stream of upbeat economic releases from the Eurozone and comments from European Central Bank (ECB) President Mario Draghi.

    Hints from the ECB chief that policymakers will begin discussing the tightening of stimulus in the autumn bolstered the common currency, keeping it elevated against the pound and helping it achieve its best levels against the US dollar since January 2015.

    Over in the US, the dollar also had to contend with the fallout from yet another drama at the White House. The sacking of Communications Director Anthony Scaramucci after

    just ten days in office elevated concerns that all the upheaval will prevent President Donald Trump from making good on his promised tax and spending plans.

    What do you need to look out for?

    If ecostats from the Eurozone keep impressing in the weeks ahead it will up the odds of the ECB opting to reign in its quantitative easing programme in September. Good news for the euro, but bad news for the GBP/EUR exchange rate.

    The pound may also be pressured lower against the euro and US dollar if Brexit negotiations fail to move forward in a positive way.

    UK data will be an additional driver of GBP exchange rate volatility, with less-than-impressive results weighing on BoE rate hike expectations and leaving Sterling struggling.

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