Sterling exchange rate Forecast – As I’m sure all our regular readers will be aware, the Pound has not been faring well against the most commonly traded currencies, the Euro and US Dollar. Brexit uncertainty has been weakening the Pound since May. However, there are Sterling curreny pairs that are actually quite high, due to weakness in their respective currencies. In today’s post I’ll have a look at where your Pound goes further.
The GBP/TRY exchange rate is very good due to a weak Lira. 2 years ago, the rate was 4.4 Lira to the Pound, but today it’s 50% higher at 6.93. There are various reasons the Lira is so weak: Uneasy relations with the USA and political strains caused by US/China trade tensions, a deep recession and rising inflation, coupled with central bank intervention in the currency markets. The currency has now stabilised and down from the peak of almost 9 to the Pound, but still a very good proposition for UK Buyers.
The South African Rand has been weakening in recent years. Due to the global slowdown, there has been a sell-off for perceived ‘riskier’ assets, one of which is the South African Rand. China and Germany slowing have given investors the jitters and South African political and economic uncertainties, combined with global trade fears, have been weakening the ZAR for some time. The result of all of this is a GBP/ZAR rate 15% higher than 2 years ago.
The GBP/AUD is attractive, rising from $1.60 to $1.79 over the last few years. The reason the ‘Aussie’ is weaker and cheaper to buy is largely due to its close ties to China. Australia relies on the Chinese economy as they purchase much of their goods including Iron Ore, one of their main exports. As China slows, and tensions between the US and China increase, it has the knock-on effect of weakening the Aussie and making it cheaper to buy. This has caused the GBP/AUD to rise steadily on average for some years.
The New Zealand Dollar weakened recently following a 50-basis point cut in their interest rate. There is also speculation they will cut rates again to try and stimulate the economy. Lower interest rates tend to weaken a currency due to the lower return on offer. Much of New Zealand’s economy relies on its agricultural commodity trade with the rest of the world, and like Australia, has a significant exposure to the Chinese economy.
The GBP/HUF rate is 10% higher than 2 years ago, so Sterling goes much further in Hungary than other European destinations. They have an export led economy, and their main trading partners are in the EU, such as Germany. A dovish central bank seems to be happy with a weaker Forint as it helps exports and the economy. Hungary also receives billions of Euros in development aid from the EU, and if converted to HUF it will increase the amount received.
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