Currency News from Currencies Direct - Costa Del Sol

  • GBP/USD recovers ground on Trump trade anxieties

    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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    Brexit jitters have continued to dominate the outlook for the pound as the next round of formal negotiations draws nearer, especially as concerns over the global trade outlook have picked up.

    Lingering uncertainties over the future of the UK economy have seen GBP/EUR slip from 1.1395 to 1.1154, even though the pairing has started to recover some of its ground.

    Similarly, GBP/USD has come under pressure, although ongoing market worries over the Trump administration’s approach to trade have limited the downside bias.

    What’s been happening?

    Although February’s UK services PMI strongly bettered forecast the pound struggled to capitalise on this stronger showing for long.

    In large part this was due to the somewhat negative market reaction to Theresa May’s much-anticipated Brexit speech, which ultimately offered less in the way of details than investors had hoped.

    This left GBP exchange rates on a generally weaker footing, with little over a year now left until the exit deadline of March 2019.

    As the EU Commission published its own draft proposals for the shape of the post-Brexit relationship this failed to encourage any particular confidence in the pound.

    All in all, the UK and EU still look to be largely at odds over a number of key issues, including the Irish border, which suggests that negotiations are unlikely to get any easier in the near future.

    Demand for the US dollar, meanwhile, fluctuated in response to the Trump administration’s decision to impose heavy tariffs on steel and aluminium imports.

    As the move was feared to spell future weakness for the US economy, with other nations at risk of imposing retaliatory measures, this encouraged the GBP/USD exchange rate to push higher over much of the last week.

    What do you need to look out for?

    A solid rallying point could be in store for the pound next week, providing that February’s UK consumer price index data betters forecast.

    If inflation is found to have picked up further on the year, rising above 3%, this would increase the pressure on the Bank of England (BoE) to raise interest rates again in the near future.

    On the other hand, any softening in price pressures may see GBP exchange rates trending lower as the prospect of a May rate hike diminishes.

    Markets are largely confident that the Federal Reserve will opt for a rate hike at its March meeting, meanwhile.

    Although an imminent increase in interest rates is already effectively priced into the US Dollar this hawkish outlook should still limit its downside potential.

    As long as the Eurozone continues to demonstrate signs of robust growth, on the other hand, the appeal of the euro is likely to remain somewhat heightened.

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