- Sterling soars on positive economic performance, Brexit agreement and Bank of England
- Euro sinking in response to poor economic data
- The US Dollar bears the brunt of a bearish Trump
Sterling soars on positive economic performance , Brexit agreement and Bank of England
UK retail sales data was a marked improvement on the previous month’s disappointment. Combined with an agreement on a Brexit transition and the Bank of England’s more aggressive hints of an interest rate increase in May, this means a much stronger Pound and happier investors. There has been a spate of buying Sterling in this current scenario, so it’s a good time to make any exchanges from the Pound into Euros and US Dollars right now.
Euro sinking in response to poor economic data
Confidence in European business has dropped to a near-one-year low, as manufacturing and industry data from the EU’s major producers, such as Germany, falls short of expectations. With Eurozone Purchasing Managers’ Indices (PMI) showing slower results for two months in a row and political uncertainty across Germany, Italy and other areas of Europe, the Eurozone has a lot on its plate. Add in the trade tensions being felt worldwide, and it’s a more gloomy picture than the Eurozone has seen for some time. Brexit discussions continue; and while significant progress is being made, any Brexit commentary from either side has the ability to knock the European and British currencies for six.
For now, at least, the Euro is losing out to its close companion, the British Pound, in a reversal of fortunes that many will welcome – although not the UK’s exporters, who have been flying high on a weaker Pound.
The US Dollar bears the brunt of a bearish Trump
Trade fears across the globe are weakening the US Dollar, as the trading tensions between the USA and China escalate. Even the Federal Reserve raising interest rates didn’t help the USD – or global share prices – as China retaliated in response to Trump’s $50 billion of trade tariffs and war on intellectual property theft. While China’s response was muted in comparison, the situation has set markets and investors on edge.
Also this week, Middle East tensions pushed up oil prices – a further factor that weakened the US Dollar. Gross Domestic Product (GDP) estimates for the US were also downgraded, painting a fairly flat picture for the US economy and its currency.
A stronger Canadian Dollar?
Nearby, the Canadian Dollar fared much better on the release of Canadian retail and inflation data, which showed inflation rose above Canada’s 2% target, hitting 2.2% annually. Retail sales increased from their previous lows, but remain around market expectations, which is currently below where they would like to be.
Antipodean central bank activities help boost the Pound
Other central banks who were busy this week include the Reserve Bank of Australia (RBA) and Reserve Bank of New Zealand (RBNZ). The Australian Dollar fell to its lowest exchange rate with the Pound since before the Brexit vote earlier this week, offering a surprise boost for anyone in the UK wanting to make AUD currency transfers.
The Reserve Bank of New Zealand has not said anything ground breaking in terms of monetary policy, but is being watched closely for any hints that could move the currency markets, particularly as the current low interest rates appeal to investors, but discourage NZ exporters.
What to watch out for next week
In the run up to the Easter Bank Holidays in the UK next week, there’s still plenty of news ahead that could knock the currency markets.
Some key economic data is due from Australia, New Zealand and Japan, including business and consumer confidence, as well as commodities updates, so Asian markets will be worth a close watch. There is also the potential to affect the other commodity currencies, the US and Canadian Dollars, in light of oil pricing and export/import relationships.
Consumer confidence data from the US will be interesting in light of the US currency’s current weakness and considerable political activity, alongside the US Gross Domestic Product figures, which could make or break the US Dollar.
The UK expects high street lending figures, while the EU has a series of important importing and consumer data releases coming out. How will the ailing Euro fare?
Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.
Recommended Content
Editors’ Picks
EUR/USD stays in positive territory near 1.0650
EUR/USD clings to modest daily gains at around 1.0650 in the American session on Wednesday. The US Dollar struggles to gather strength amid a modest improvement seen in risk mood and helps the pair hold its ground.
GBP/USD stabilizes at around 1.2450 after UK inflation data
GBP/USD consolidates its daily gains near 1.2450 after recovering toward 1.2500 with the immediate reaction to stronger-than-expected inflation data from the UK. The renewed US Dollar weakness also helps the pair hold its ground.
Gold eases despite risk-off mood
Gold trades in a relatively tight range near $2,390 in the second half of the day on Wednesday. In the absence of high-tier data releases, investors keep a close eye on headlines surrounding the Iran-Israel conflict.
XRP tests $0.50 resistance after Ripple CLO clarifies that no pretrial conference took place with SEC
XRP is stuck below $0.50 resistance after failing to close above this level since Monday. Ripple CLO Stuart Alderoty said late Tuesday there was no pretrial conference since the SEC dropped charges against executives.
World economy: To cut or not to cut (simultaneously)?
US inflation March figure, again higher than expected, put an end to the scenario of a simultaneous first rate cut by the Fed, the ECB, and the BoE in June.