The past month was marked by significant volatility in the pound in response to a flurry of UK political developments. This saw the GBP/EUR trade between 1.09 and 1.13 with EUR/GBP retreating to 0.88.
Meanwhile, GBP/USD climbed from 1.21 to 1.25 having struck a three-year low of 1.19 along the way, whilst EUR/USD held steady at 1.10.
What’s been happening?
The pound was affected by some dramatic swings over the last month, hitting some key levels against its peers as it was rocked by UK political developments.
This began with Boris Johnson’s announcement that parliament would be suspended for five-weeks beginning early September. A move widely perceived as attempting to frustrating attempts to block a no-deal Brexit.
Unsurprisingly this knocked Sterling sentiment, even sending GBP/USD plummeting to a three-year low.
However subsequent movement in the pound has been largely positive, as Johnson faced a number of setbacks thought to lower the odds of a no-deal Brexit.
This included the loss of his majority in parliament, the passing of a bill compelling him to seek another Brexit extension and the rejection of his calls for a snap election.
Adding to the upside in Sterling was also a string of upbeat UK economic data, including a robust GDP reading, which helped to dispel concerns of a recession.
Occupying almost all the attention of EUR investors over the last month has been the European Central Bank and its long awaited stimulus package.
Alongside some worrying data from Germany, this kept a lid on the euro through much of August and the first half of September as markets speculated on what this package may include.
The stimulus measures were ultimately received positively by markets, helping to buoy the single currency going into the second half of September.
Finally, trade in the US dollar has been mixed in recent weeks.
This has largely been in response to rising fears that a US recession could be looming following an inversion in the US bond yield curve as well as a shock contraction in the US manufacturing sector in August.
The month was bookended by the Federal Reserve’s September policy meeting, which saw the bank cut interest rates again. However, the US dollar actually benefited as the central bank’s forward guidance indicated that they may not cut rates again in 2019.
The Bank of England (BoE), meanwhile, adopted a fairly neutral stance at its latest policy meeting as policymakers remain cautious about the Brexit outlook.
What do you need to look out for?
UK political developments are likely to continue to act as the main catalyst of movement in the pound as we get closer to the current Brexit deadline on 31 October.
The upcoming EU summit in mid-October will likely be key for GBP investors, as all bets will be off if Boris Johnson fails to secure a deal by then.
Meanwhile, the euro may struggle to find support over the coming month if German data remains in the doldrums.
Europe’s largest economy looks to be teetering on the edge of a recession, with any additional sign that growth in the country will contract again in the third quarter likely to dent the appeal of the single currency.
Finally, the US dollar may be particularly sensitive to economic data in the coming weeks, as markets look to gauge whether the US economy may be drifting towards a recession.
USD investors are also likely to be preoccupied by US-China trade developments. Tensions between the two powers have thawed in recent weeks, stoking hopes an interim trade deal could be found following high level talks in October.
At Currencies Direct we’re here to talk currency whenever you need us, so please get in touch if you want to know more about the latest news or how it could impact your currency transfers. Since 1996 we have helped more than 250,000 customers with their currency transfers, so why not give us a call on 00351 289 395 739 to find out more or alternatively visit the website on www.currenciesdirect.com/portugal and register to get regular updates on the currency markets (please mention Algarve Daily News as how you heard about us).
T: 00351 289 395 739
M: 00351 912 510 121
E: jose.a@currenciesdirect.com
W: www.currenciesdirect.com/portugal
Currencies Direct - Ave 5 de Outubro, No 246, Almancil, Portugal, 8135-103
