It’s the end of a week that has not been particularly favourable for the Pound. The threat of a no deal Brexit has dragged the Pound lower across the board, pushing Sterling to an eleven-month low against the US Dollar and its worst levels against the Euro since September 2017.
In today’s post, we’ll take a detailed look at the forecast for the major currency pairs that we trade for our clients, including: Sterling (GBP), Euro (EUR), US Dollar (USD), Australian Dollar (AUD), Canadian Dollar (CAD). To speak to a currency specialist and get a free quote, get in touch today.
Pound Sterling (GBP) Forecast
Speculation over the prospect of the UK leaving the EU in March 2019 without any deal in place has weighed heavily on the Pound in recent weeks. Comments from international trade secretary Liam Fox prompted GBP exchange rates to slump sharply as he warned that the chances of a no deal Brexit stand at 60-40. This overshadowed the Bank of England’s (BoE) decision to raise interest rates from 0.50% to 0.75% at its August policy meeting.
Until investors see signs that the UK and EU are progressing towards an agreement, the mood towards the Pound is likely to remain generally negative.
However, if July’s UK inflation data shows a fresh uptick in price pressures this could offer support to GBP exchange rates. As higher inflation may spur the BoE to tighten monetary policy again sooner rather than later, the Pound could strengthen on the back of the data.
Euro (EUR) Forecast
Eurozone data has proved largely disappointing in recent weeks, highlighting the currency union’s struggle to regain its lost economic momentum. A slowdown in German inflation was particularly discouraging for the Euro, with the monthly consumer price easing from 0.5% to 0.1% in June.
As the European Central Bank (ECB) highlighted intensifying downside risks to the global economy, this suggests that the central bank is likely to leave monetary policy on hold for longer. While German exports held steady on the month in June concerns remain that mounting US trade tensions are weighing on economic growth and will continue to do so in the months ahead.
Unless the Eurozone economy can demonstrate greater signs of resilience, though, EUR exchange rates may struggle to find any significant gains.
US Dollar (USD) Forecast
Although concerns remain over the negative impact that the escalating US-China trade dispute could have on the US economy, this failed to prevent USD exchange rates strengthening. Demand for the US Dollar strengthened in the wake of the Federal Open Market Committee’s (FOMC) August policy meeting.
As policymakers paved the way for a September interest rate hike this encouraged investors to pile into the US Dollar, in spite of some signs of weakness in recent US data. While US protectionism is likely to boost market risk aversion, benefitting the safe-haven US Dollar, this could damage the domestic outlook if further tariffs are imposed.
If August’s Fed meeting minutes raise the odds of a September interest rate hike further USD exchange rates could remain on a bullish run, even if subsequent domestic data falls short of forecast.
Australian Dollar (AUD) Forecast
While Reserve Bank of Australia (RBA) Governor Philip Lowe maintained a rather upbeat tone on the domestic outlook this failed to benefit the Australian Dollar. As the RBA still looks set to leave interest rates on hold for the foreseeable future AUD exchange rates took little encouragement from Governor Lowe’s commentary.
Although the Chinese economy demonstrated signs of resilience this was not enough to prevent a fresh bout of risk aversion as trade tensions between the US and China continued to escalate. Fresh volatility is likely for the Australian Dollar with the release of July’s Australian labour market data, which may see the unemployment rate push higher once again.
Focus will also fall on the second quarter wage price index, with any softening in wage growth set to weigh heavily on AUD exchange rates.
Canadian Dollar (CAD) Forecast
As the Canadian inflation rate saw an unexpectedly strong uptick on the year in June this offered support to the Canadian Dollar. With price pressures continuing to mount and the latest retail sales figures showing a solid increase, confidence in the health of the Canadian economy improved. CAD exchange rates also benefitted from market hopes that NAFTA re-negotiations could successfully conclude in the weeks ahead.
Fresh US sanctions on Iran helped to boost oil prices, meanwhile, even as US stockpiles failed to diminish as forecast. If Canadian inflation shows signs of falling back the appeal of the Canadian Dollar could weaken, especially if market risk appetite deteriorates further.
Getting the Best Exchange Rates
We offer exceptional rates of exchange for all major currencies. We don’t offer cash or holiday money – our service is for private and corporate clients looking to convert large sums on a bank to bank transfer basis. So if you’re buying or selling property abroad, or a business that imports or exports goods abroad, we can save you money. Get in touch today for a quick chat and a free quote.