Currency Update from Currencies Direct - Costa Del Sol

  • Pound euro exchange rate climbs to three-week high after positive BoE meeting

    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…

    Latest currency news

    Although the Bank of England (BoE) did not raise interest rates at its November policy meeting the mood towards the pound nevertheless picked up in the wake of the announcement.

    While the latest US payrolls data pointed towards a continued tightening of the labour market this was not enough to prevent the pound to US dollar exchange rate pushing higher.

    The GBP/EUR exchange rate, meanwhile, climbed to a three-week high of €1.14 as speculation over Brexit continued to pick up.

    What’s been happening?

    Even though signs still point towards the BoE leaving interest rates on hold for some months to come, thanks to the uncertainty surrounding Brexit, this was not enough to discourage investors.

    As policymakers continue to signal that interest rates are likely to rise further over the coming years this has given GBP exchange rates a boost.

    Rumours that the UK and EU are nearing a breakthrough on the future of financial services also encouraged demand for the pound, in spite of the still-outstanding issue of the Irish border.

    While October’s UK manufacturing and services PMIs proved disappointing this was not enough to weigh down GBP exchange rates.

    Demand for the euro failed to pick up in the wake of an acceleration in the Eurozone consumer price index, meanwhile.

    While the inflation rate remained in excess of the European Central Bank’s (ECB) 2% target investors still see little chance of interest rates rising in the near future.

    As the US trade deficit widened further than forecast in September this limited the appeal of the US dollar, in spite of the latest positive US jobs data.

    Anticipation ahead of the midterm elections and lingering concerns over the impact of the Trump administration’s push for protectionism also weighed on USD exchange rates.

    What do you need to look out for?

    Confidence in the pound could deteriorate if the third quarter UK gross domestic product fails to show an improvement.

    Unless the UK economy demonstrates resilience in the face of Brexit anxiety support for GBP exchange rates looks set to diminish.

    An uptick in growth, on the other hand, could help the pound rise to fresh multi-week highs against its rivals.

    Stronger German trade data may offer the euro a rallying point, meanwhile, as investors look for an incentive to buy back into the single currency.

    The issue of the controversial Italian budget could keep the euro under pressure, though, as the government shows no signs of budging from its budget deficit target.

    As long as the Federal Reserve maintains a hawkish outlook at its November policy meeting, paving the way for a December interest rate hike, this should keep the US dollar on a stronger footing.

     

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