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  • UK Investors Awaiting Leadership Outcome for Brexit and Pound Outlooks

    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

    Since Britain’s Conservative Party leadership contest began last week, the pound’s movement has been limited due to expectations that there will be no Brexit progress until it concludes.

    Despite this, the euro has been unable to capitalise on the pound’s weakness due to various Eurozone economic and political uncertainties, leaving GBP/EUR trending in a tight region near €1.12, while EUR/GBP is trending near £0.89.

    The US dollar has seen high volatility throughout, and GBP/USD is currently trending near its worst levels of $1.25, and EUR/USD near $1.12, as the greenback steadies ahead of this week’s upcoming Federal Reserve news.

    What’s been happening?

    After falling throughout May as no-deal Brexit fears returned, the pound has been trending closer and closer to its worst levels all year since the beginning of the month.

    UK Prime Minister Theresa May stepped down as leader of the Conservative Party, kicking off the party’s leadership contest. The frontrunner of the contest, Boris Johnson, advocates for a hard Brexit, which is keeping pressure on the pound.

    The euro has been unable to capitalise on the pound’s weakness though.

    Since the end of May, GBP/EUR losses have slowed, as Eurozone data continues to disappoint investors, worsening concerns that the European Central Bank (ECB) could soon be pressured into taking a more dovish stance on Eurozone monetary policy.

    Still, much of the strength the US dollar showed earlier in the year has also faded. US trade protectionism and signs of weakness in the economy have led to higher Federal Reserve interest rate cut expectations.

    Speculation that rate cut bets have been overdone helped the US dollar to recover last week, but the US currency’s months of gains appear to have come to an end.

    What do you need to look out for?

    For the pound, it’s unlikely that much will change for at least another month, as the formalities of the Conservative Party leadership contest unfold.

    Markets already have a pretty good idea of who will be PM, but until it is confirmed there are unlikely to be any developments in Brexit.

    This will leave the pound to be driven by strength in its rivals, as both the euro and US dollar are likely to be driven by economic, political, and Central Bank news.

    This week’s biggest event will be Wednesday’s Federal Reserve decision, and the tone the bank takes on US monetary policy could have a major impact on the US dollar’s movement.

    European Central Bank (ECB) speculation will be influenced by upcoming major Eurozone data, such as inflation data due tomorrow.

    Aside from major data, news in trade and political tensions will also influence the euro and US dollar.


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