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October

A week dominated by politics and central banking activity

Published: Thursday 25 October 2018

  • Euro slips on political and economic factors
  • Sterling stuck between a rock and a hard place
  • Bank of Canada hikes interest rates and boosts Canadian Dollar
  • Watch out for the US Dollar…
  • Asian markets anxious
​​Euro slides under Italy and Brexit troubles
 
The Euro is suffering under the strain of the Italian budget, namely its effects on the Eurozone economy, and Brexit, alongside disappointing manufacturing and industrial data for the Eurozone. This follows a glimmer of hope for the Euro earlier this week as German producer price indices – a crucial factor in Gross Domestic Product (GDP) growth – provided better results than anticipated. But there are bigger concerns overshadowing Europe in the current climate. While the Euro has crept up a little in advance of Mario Draghi’s European Central Bank (ECB) speech and press conference, all eyes will be on the ECB’s plans for ongoing monetary policy. No or little change to their current stance will do the Euro no favours.
 
Pound confounded by Brexit conjecture
 
The Euro sliding would usually be enough to help the Pound claw back some strength, but sadly, Sterling, too, is under pressure from Brexit no deal fears and remains locked at low levels against its key currency compatriots. While the UK Prime Minister claims that the Brexit deal is 95% figured out, the remaining 5% – a significant obstacle on the Northern Ireland-Republic of Ireland border and relationship post-Brexit – is under serious scrutiny. Add to that the media spotlight on in-fighting and votes of no-confidence from opposing political parties and allies of the current government alike, and the uncertainty continues to derail the Pound and public confidence in what happens next.
 
Canada increases interest rates and boosts Canadian Dollar

The Bank of Canada (BoC), as expected, increased interest rates to the current level for the first time since 2008. While the rate increase was expected by the markets, the confidence in the economy has served to boost the Canadian Dollar against its US counterpart. Now the USDCAD has taken a tumble. Will any of the other currencies have the power to beat the US Dollar? They will have their work cut out – recent Federal Reserve comments all point to confidence in a strong US economy and further interest rate rises this year and next. And the US Dollar’s strong position in times of political trouble is keeping it strong against most other currency partners.
 
Stack of Euro coins and new pound coins - Halo Financial

What to watch out for next…
 
Anxiety in Asia Pacific
 
Asian markets are nervous in response to several geopolitical and economic factors. The Bank of Japan’s recent report setting out concerns about debt markets has sent ripples across markets; and US President Trump’s talk of increasing nuclear weapon production with China and Russia in mind is making everyone nervous, not just China’s immediate neighbours…
 
Rising oil prices and falling exports hit New Zealand trade figures

New Zealand’s trade deficit widened significantly overnight, when a narrowing was expected. The New Zealand trade gap has widened in response to increased oil prices and sinking exports, which were affected by the seasonal nature of the NZ farming industry. A boost to the New Zealand Dollar had been expected, but this latest data disappointed, adding to concerns across markets in Asia Pacific. 

In contrast, the Australian Dollar strengthened on the news that unemployment has fallen significantly, along with the Reserve Bank of Australia saying that the next interest rate rise could be higher – finally! The Australian Dollar is one to keep a close eye on, having been yo-yoing for some time now.

Keep a close eye on the USA…
 
Trump has again openly criticised the Federal Reserve, the US central bank, for being too eager to raise interest rates. This could, in turn, weaken the US Dollar – currently strong on geopolitical tensions, ironically – but whether this is all part of a grand plan to boost US exports during all the trade war talk, or just more of the POTUS shooting his mouth off on social media, time will tell. Keep a close watch if you are buying or selling US Dollars.
 
#ThursdayThoughts

We will be sharing some words of wisdom from the Halo team and a host of experts for businesses and individuals making international payments in the coming weeks. Whether you are expanding your business internationally or planning to emigrate, we have a panel of experts to help you every step of the way.

Growing your food and drink business

Halo Financial Founding Director David Johnson will be talking about how food and drink SMEs can manage currency fluctuations at the Department for International Trade event on 28th November, hosted at Irwin Mitchell in London. Register free of charge here: http://bit.ly/FoodandDrinkEvent

Emigrating?

If you are thinking of migrating to Australia or New Zealand, you are invited to this exclusive half-day seminar in Chester. As guests are limited to 50 people, everyone will get the chance to speak to the experts face-to-face.

Find out all you need to know about:
  • Visas 
  • Employment Down Under
  • Financial matters
  • Living in Australia or New Zealand
Book online and start your emigration journey in safe hands:
https://www.emigrate2.co.uk/emg-chester/