Hopes for a Clean-Break Brexit Boost GBP/EUR and GBP/USD Exchange Rates

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…

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The pound has been strongly influenced by Brexit over the past two weeks, making tentative gains against the euro but having a harder time against the US dollar.

The GBP/EUR rate has improved over the previous fortnight, opening at €1.10 and hitting €1.12 last week; the pairing has most recently fallen back to €1.11. On the other side, the EUR/GBP exchange rate has fallen from £0.90 to £0.89 over the same period.

Elsewhere, the GBP/USD exchange rate opened at $1.28 and rose to $1.30 over the previous two weeks; Sterling has since fallen to $1.29 in the pairing. The EUR/USD rate has fallen from $1.16 to $1.15 over the two-week period.

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What’s been happening?

The last two weeks have seen the pound fluctuate on Brexit speculation, with only limited domestic data being released to give traders something to go on.

The main support for Sterling has been the assumption that a no-deal Brexit could be avoided, following remarks from EU Chief Negotiator Michel Barnier.

Mr Barnier did not specifically rule out a no-deal Brexit, but raised hopes for imminent progress in negotiations that could lead to a good deal being struck between the UK and the EU.

Euro traders drew the short straw, with Eurozone data showing falling economic confidence and a reduction in the overall Eurozone inflation rate.

US dollar movement was dominated by trading news - the US currency rose when it was reported that the US and Mexico had agreed to a provisionally revised trade deal.

Less supportive were concerns about the next round of US-Chinese trade tariffs, which experts believe could cause economic pain for manufacturers in both nations.

What do you need to look out for?

A key Bank of England (BoE) meeting is coming this Thursday, during which BoE officials will discuss whether to adjust interest rates.

Policymakers aren’t expected to change the rate from 0.75%, but could still trigger GBP/EUR and GBP/USD exchange rate gains if they hint at a 2019 rate hike.

Another major piece of UK data will be 19th September’s inflation rate readings for August. If inflation picks up then Sterling could also appreciate due to greater pressure on the BoE to consider raising interest rates.

The euro could be moved by this Thursday’s European Central Bank (ECB) meeting if, like the BoE officials, ECB policymakers hint at higher interest rates in the future.

This coming Thursday will also be a key one for US dollar movement, when key inflation rate figures for August are due out.

If the readings show a slowdown then the US dollar could fall in value, as slower inflation reduces the likelihood of a near-term Fed interest rate hike.

 

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