Currency Update from Currencies Direct - Costal Del Sol

  • UK political tensions weigh on pound 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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    Signs that the UK economy picked up speed in the second quarter encouraged the pound, even as domestic politics gave rise to fresh uncertainty and Brexit worries.

    The pound to euro exchange rate has struggled to find much momentum in recent weeks, hitting a high of 1.13 before dropping back to 1.12.

    Things have been a little more volatile for the GBP/USD exchange rate, meanwhile, thanks to ongoing trade tensions between the US and China, as well as its allies.

    What’s been happening?

    Political developments have dominated the mood towards the pound recently, with markets still nervous over a relative lack of progress regarding Brexit.

    A crunch cabinet meeting yielded a white paper that outlines a softer form of Brexit, something that businesses and investors tentatively welcomed.

    However, the shock resignations of Brexit secretary David Davis and foreign secretary Boris Johnson shortly afterwards saw GBP exchange rates slump sharply.

    Worries over a potential leadership challenge against Theresa May weighed heavily on the pound, although these fears soon eased in the face of positive domestic growth data.

    Confidence in the US dollar, on the other hand, fluctuated in response to the Trump administration’s threat to impose additional tariffs on China.

    The prospect of a worsening trade war between the US and China spooked investors, leaving USD exchange rates on a weaker footing amid fears over the negative impact this will have on US growth.

    What do you need to look out for?

    A fresh uptick in the UK consumer price index could see GBP exchange rates rally sharply, with higher inflation likely to encourage greater Bank of England (BoE) hawkishness.

    Any easing in inflationary pressure, though, would leave the pound vulnerable to further losses.

    As long as BoE policymakers look on track to raise interest rates on 2nd August, however, the downside potential of Sterling is likely to prove limited.

    Commentary from the Federal Reserve could undermine the appeal of the US dollar, meanwhile, as worries over the impact of the Trump administration’s protectionist policies mount.

    If the Eurozone economy saw stronger growth in the second quarter this could help to boost the euro, encouraging bets that the economy is recovering after a disappointing start to the year.


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