The Pound has had a very positive start to the year, rising around 6% against the US Dollar and 2% against the Euro so far. This week has been one of the best it has had in months, hitting a new post-Brexit high against the Dollar and also receiving a boost against the Euro.
We’ve taken a look at why the Pound has been rising recently and what it means for you.
The US Dollar has so far started this year as it ended the last, continuing to weaken despite rising economic growth, fiscal stimulus and interest rate rises. This is considered to be partly because of the strength of the Euro due to strong economic performance in the Eurozone. There are also concerns about the long-term US economic outlook and Trump’s protectionist approach.
The US Dollar came under further pressure this week following comments from US Treasury Secretary Steven Mnuchin at the annual World Economic Forum in Davos, Switzerland. He commented that the weaker Dollar was good for US trade and that he was not concerned about short-term weakness. Shortly afterwards, the US Dollar hit a three year low.
The Pound was helped earlier this week by a set of strong data on the labour market, which saw unemployment reach a four decade low and wage growth at its fastest pace in almost a year. Today’s GDP figures, showing that the UK economy grew faster than expected in the fourth quarter of last year, have provided another boost.
This week, after a quiet period on Brexit, there have also been some positive noises from the UK government about a soft Brexit and hopes for a trade deal. David Davis spoke on Wednesday about his expectations for the implementation period once the UK leaves the EU in March 2019. He re-iterated Theresa May’s position that the UK intends to broadly accept existing EU rules and regulations during a two year transition. The currency markets appear to have been reassured by his comments, but will be closely watching further developments.
What does this mean for you?
Sterling remains sensitive both to internal political and economic factors as well as events overseas, any of which could create volatility for the currency. In particular, the currency markets will continue to closely follow the Brexit negotiations, although there is not yet a date for the next round of talks.
But whatever happens on the currency markets, we’re always here to help you make international money transfers.
We can be your eyes and ears in the market, with a range of currency tools to help you monitor market movements. With a HiFX account, you can also create personalised rate alerts to let you know when your desired exchange rate becomes available.
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If you’d like to discuss your situation with us in more detail, please feel free to contact us and our friendly team will be happy to help.
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