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Sterling struggles, then silver lining shines

Published: Wednesday 29 August 2018

  • Trouble ahead for Eurozone? 
  • Canadian Dollar feels heat from oil and trade talks
  • Australian Dollar takes a tumble
  • US Dollar suffers from political pressures
The Pound began the week as beleaguered as it has been in recent weeks and the UK currency did not benefit from the announcement that the Brexit deal deadline has moved to mid-November, having originally been expected to reach a close at the end of the EU Summit on 18th October. Comments from EU Chief Negotiator Michel Barnier on Wednesday 29th August that the EU is prepared to present the UK with an unprecedented deal offered a genuine glimmer of hope after all the Brexit “deal or no deal?” conjecture, however, and boosted the Pound against the US Dollar, reaching the 1.300 level.

Speculation on the nature of the UK-EU Brexit deal will continue to characterise the Pound’s performance, especially as there is little economic data of note to be released until the start of September. This also leaves Sterling at the mercy of other political and economic goings-on in Europe and the US, so expect the unexpected...

Trouble ahead for Eurozone?

The Euro started the week strong on positive German business sentiment results, released while the UK enjoyed their last Bank Holiday until the festive season. Positive news of a “special” Brexit deal has lightened the market mood and provided some support for the Euro.

The Eurozone is steeling itself for its own set of issues, however, as Germany discusses a potential bailout package for Turkey in an attempt to minimise the financial ripple effects across the Eurozone. That has been officially denied, but helping Turkey out is in Germany’s financial and economic interests, given the considerable exposure of German banks in Turkey. This is all happening against the backdrop of ongoing Brexit talks and uncertainty on the nature of the Eurozone-UK relationship and against a backdrop of Italian fury at the lack of support being shown to them over the migrant crisis.

Canadian Dollar feels heat from oil and trade talks

The Canadian Dollar was under pressure last week, as oil prices rose and North American Free Trade Agreement (NAFTA) talks continue, but seem to be split into two agreements with the US at the centre of a Mexican and a separate Canadian trade deal.  Speculation about Canada’s economy and monetary policy also hindered Canadian Dollar strength. However, rumours at the start of the week that Canada could be conceding on some points in the NAFTA trade talks provided some hope that the talks could move forward, and provided a boost for the Canadian Dollar. The Canadian Foreign Affairs Minister is speaking as we write: so far, they report that they are pleased with progress on the NAFTA talks with US and Mexico. Watch this space…
Paper money and coins of different countries

Australian Dollar takes a tumble

Political woes have caused the Australian Dollar to fall, as yet another Australian Prime Minister bites the dust. While Australia’s economy is doing well, it’s not growing as rapidly as it has in the past, with muted inflationary growth, wages rising slowly and house prices – which have been sky-high in many areas in recent years – falling in some key regions. This slowing of economic pace is putting the brakes on any potential interest rate hikes, causing a lack of overall confidence in the economic outlook and weakening the Australian Dollar. Be warned – there is still potential for the Australian Dollar to drop down even more – political pressures are having a more marked effect on currencies than economic performance in the current uncertain climate.

US Dollar suffers from political pressures

The US Dollar is also bearing the brunt of political strains. While most US economic performance indicators, such as the healthy Consumer Confidence Index, continue to reflect positive results, the antics of the US President and his advisors are casting a shadow over the US Dollar. At the same time, unemployment in the US is at a near 50-year low, although sales of new homes have fallen the lowest for some nine months. So the picture isn’t all rosy.

The US Dollar did manage to claw back some of the recent losses on the positive news of a trade agreement between the US and Mexico, although a more confident climate in the markets as global political and trade talks turn more positive starts to take its toll on the US Dollar, pulling away investors who had turned to the US Dollar as a safe haven currency and a port in the storm.

If you or your business are affected by the current market uncertainty, or you are unsure what it all means for you, contact your Currency Consultant for guidance today.


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