A week round-up of currency

This week, pound sterling hit an 11-month high against the US dollar.

Why?

President Trump is having a hard time in office, the main problem being he can't pass his Healthcare Reform Bill. The knock-on effect is that there is now uncertainty as to whether he will ever be able to get any Bill passed the Senate, as the House remains divided more than ever on their views.

The US Economy is also growing at a slower rate than expected. At the end of July, the US Federal Reserve made the decision to keep Interest Rates the same. The Fed may also continue to struggle to raise Interest Rates if Inflation continues to undershoot the benchmark of 2%.

We could again see pound sterling strengthen against the US dollar if President Trump fails to pass another Bill or remains in the media headlines with Russian rumours.

However, pound sterling has had less luck against the euro.

With the Eurozone economy currently out performing that of the US, with core inflation rising and the European Central Bank also holding their Interest Rates, its led to an overall stronger performance than perhaps expected off the back of the current US dollar slump, especially compared to pound sterling.

The Eurozone is currently seeing a period of strength, and over the past few years the ECB has introduced a Quantitative Easing programme which has allowed this. Now with an almost stable economy, ECB President Mario Draghi has suggested the easing of the QE programme, good news for Investors and sending Traders into a frenzy whenever Draghi does a highly publicised speech (no matter how dovish he tries to make them).

What’s on the horizon?

German Election

On September 24th the Germans go to the polls, with Angela Merkel currently leading that race. However, if we have a Brexit/Trump scenario – any shock result will create euro weakness (currencies hate the unexpected).

Brexit

When the Brexit timeline was announced, phase two of negotiations are supposed to start in October 2017. We’ve not heard anything different, so we are still hoping for that. However, it’s not looking good for pound sterling at the moment with no new trade deals yet to be made, we will continue to see pound sterling under pressure for time to come.

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