Early in the morning Bank of England Chief economist Andy Haldane spoke and remained fairly upbeat about the current climate, citing that surprisingly U.K household spending has remained remarkably resilient. However, there has been a record drop in consumer credit which suggests that the U.K economy is still a long way from being on top form.
Mr Haldane also touched on negative interest rates suggesting that they are being studied as a possibility but this does not mean that they will be used. For those not familiar with interest rate changes, a higher interest rate can often be seen as a positive for the currency concerned as it makes it become more attractive for investors, a drop or expected drop in interest rates can do the opposite and lead to a currency losing value.
Negative interest rates have been a hot topic over the past few months and it is yet to be seen whether or not the BoE will go down this route, but it is still something to keep in mind as an announcement that they will be looking to adopt this strategy may lead to the pound losing value.
Once again Brexit is the hottest topic on the agenda and most likely the biggest driver for sterling and euro exchange rates in the coming weeks. We had seen talks grind to a halt only last week, which had led to the pound losing value against most major currencies as both sides appeared to stand their ground and suggest that they would not be looking to budge on their current stance.
This appears to have been short lived, the EU are back in London and talks have resumed and both sides do not appear to have the appetite for further economic disruption which would result should no deal be agreed.
Yesterday talks resumed between EU Chief negotiator Michel Barnier and David Frost. Downing Street were quick to announce that a deal is by no means going to be done in a continuation of appearing to stand firm, but it does feel deep down that this is standing ground on the face of it but in real terms there is a likelihood that something could happen in the next few weeks.
With this in mind a Brexit deal announcement could lead to sterling gaining strength against all major currencies, so this is one to watch very closely if you have a large currency exchange coming up involving the pound in either direction.
Should talks fall through yet again, then with the clock now ticking this could result in sterling exchange rates witnessing significant weakness as no deal brexit would become a high possibility.
euro exchange rates have remained fairly flat is not gaining a little strength against the dollar and Australian dollar due to the talks resuming, but I also feel that a deal could be seen as positive for euro against other major currencies and no deal may also lead to euro weakness.
Last night saw the final debate between current President Donald Trump and Joe Biden which was a fiery affair. Currently the odds for the election are well in Joe Biden's favour, with him sitting at 1/2 (66.7%) chance and Trump sitting at 15/8 (34.8%), but it is also important to remember that over the past few years the odds have not actually been in line with the true result, the Brexit referendum being a great example.
Biden attacked Trumps handling of COVID-19 and suggested that anyone responsible for over 220,000 should not be voted in as President for a second term.
Trump consistently tried to talk over Biden and appeared a little frantic in the debate and many commentators suggested that his shouting down of Biden’s questions will have not done a lot to help his chances.
It is tough to know just what may happen to dollar exchange rates should we see Joe Biden announced as the new President of the U.S, there is an argument to say that his approach may not be as business focused as Trump’s would be, which could make an argument for a weaker dollar, but equally in times of U.S uncertainty sometimes the dollar can gain strength, being seen as a safer haven currency when global uncertainty heightens. There is a well know saying that when the U.S sneezes the world catches a cold, so this election has real potential to impact all major currencies in the next two weeks and beyond.
If you have a large currency exchange coming up either for you or your business, then a lot really depends on your individual situation and your approach to risk, as we could be in for a fairly volatile few weeks and months depending on the outcomes of the above.
There are options available, you can lock in currency in advance, you can set official market orders to buy or sell at a specific rate or you can hedge your risk and split your requirement into various chunks.
Whatever your plans it really is key to have a proactive and efficient currency broker on your side and this is where we can step in and help. Not only can we act as your eyes and ears on the market but we can get in touch the second an opportunity arises, this can prove invaluable in circumstances and market like this.
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