Good afternoon. In today’s Monthly Currency Forecast I’ll take a look at how some major currencies performed last month, and what the coming weeks could have in store. I’ll focus on GBP, EUR, USD, AUD and CAD. If you need to exchange currency at the best rates and would like a quote, click here.
Pound Sterling Forecast (GBP)
After some dramatic swings in the Pound over the first quarter of the year, volatility in the UK currency finally began to fade in April after Brexit was delayed until October. While markets were relieved that the UK did not ‘crash out’ of the EU without a deal, Sterling still drifted lower throughout the month amidst concerns about how another six-months of Brexit uncertainty could impact the UK economy. Meanwhile UK economic data finally began to influence GBP exchange rates again last month. However some mixed data, most notably the slowdown in inflation in March, meant the Pound was unable to benefit from the lull in Brexit angst.
Looking to the month ahead, we are likely to continue to see economic data have a greater bearing on Sterling in the coming weeks, notably with the UK’s first quarter GDP print. However, ultimately the direction of GBP in May will be reliant upon Brexit sentiment as well as the outcome of the upcoming European elections, which the UK looks unlikely to avoid.
Euro Forecast (EUR)
The Euro was beset by another month of underwhelming economic data in April, having the effect of limiting demand for the single currency. Adding to the pressure on EUR exchange rates was another cautious policy meeting from the European Central Bank, with ECB President Mario Draghi again warning of the downside risks facing the Eurozone.
However, offering some support to the Euro at the very end of the month was the Eurozone’s latest GDP figures, which defied expectations as they revealed growth accelerated from 0.2% to 0.4% in the first quarter of 2019.
The Euro’s fortunes in May are likely to be closely tied to the European elections, with the single currency potentially weakening if there is a surge in support for Eurosceptic parties. On top of this, EUR investors will have to contend with the latest round of Eurozone economic releases, which could dampen market appetite if data remains broadly gloomy.
US Dollar Forecast (USD)
The US Dollar proved to be the big winner in April, with the safe-haven currency punching higher as a risk-off mood swept through markets.
This appeared mostly driven by an increasingly dovish outlook from central banks around the globe, with economists forecasting that some could even implement rate cuts in 2019.
Further bolstering the appeal of USD throughout April was a run of solid economic data, capped off by a surprisingly strong GDP print, which saw headline growth jump from 2.2% to 3.2% in the first quarter of 2019. Whether the US Dollar will be able to carry this momentum through to this month will likely depend on whether the risk-off mood continues to prevail, with USD exchange rates potentially coming under pressure if the US and China are able to finalise their trade deal.
Australian Dollar Forecast (AUD)
Trade in the Australian Dollar was mostly steady throughout the first half of April, drifting higher against its peers thanks to some upbeat Chinese data and rising commodity prices. However the ‘Aussie’ then fell off a cliff with the publication of Australia’s CPI figures towards the end of the month as domestic inflation slumped to a two-year low in the first quarter. This prompted significant speculation that it could force the Reserve Bank of Australia’s hand and result in interest rates being lowered to a new record low this year.
All eyes will now be on the RBA’s upcoming policy meeting at the start of May with the Australian Dollar likely to tumble further if it drops any hints that a rate cut is on the cards this summer.
Canadian Dollar Forecast (CAD)
The Canadian Dollar initially showed some resilience in April, holding its ground against its peers as oil prices struck a new 2019 high, with Brent crude passing $75 a barrel. However the jump in oil prices proved short lived, which left the ‘Loonie’ open to some sharp losses following the Bank of Canada’s latest policy meeting, where it dropped all mention of a potential rate hike in 2019 from its policy statement.
Looking ahead, the outlook for the Canadian Dollar will likely depend on domestic data, with CAD exchange rates likely to come under fire if there are any signs that domestic growth may have contracted again in March.
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