Sterling on Friday saw the highest rates against the euro since the December election seeing interbank rates hit 1.1921 against the EUR and 3 week highs against the USD seeing rates hit 1.3209.
This is due to the Bank of England (BoE) deciding not to cut interest rates on Thursday after a couple of weeks of uncertainty as to whether or not they would do so. 11pm Friday last week saw the UK officially leave the EU with it now entering a 11-month transitional period. “We can expect to see some volatility throughout the next 11-month transition period as we move into unchartered territory” Nigel Green, The CEO of Financial advisory Company DeVere group has said.
If it does looks as if the negotiations maybe coming to stalemate we could see sterling weakness due to the fact PM Boris Johnson is reluctant to delay the transition period any further than the 11 months as agreed, which means if they fail to reach an agreement by December 31st there could still be a risk of a no-deal Brexit. This is likely to limit any major strength in GBP over 2020 unless it becomes clear a deal is almost guaranteed.
The EUR finished the week on a high against the USD gaining around 0.5% in the markets from its lowest point last week (1.0992 / 1.1094). The EUR finished the week lower against GBP (0.8487 / 0.8401). This is mainly down to sterling strength as a result of the decision taken by the BoE to not cut interest rates.
On Friday last week we saw the UK leave the EU and the thoughts on the currency pairing EUR/GBP over the next 11 months could be quite volatile and dependant on any news the comes from the talks.
Last week saw the USD rise against the sentiment-tied currencies of the AUD and the NZD but saw the currency fall against the EUR and GBP as the week came to an end. As expected the impeachment trial Trump is currently facing is looking like coming to an end with the President set to remain in office after the witness vote failed in the senate which means there will be no new witnesses called in this trial including from former national security adviser John Bolton, a person who the Democrats wanted to call to be a witness due to reports he can verify all of the accusations held against the current President.
The US has now reported 8 cases of the global health issue - coronavirus which is expected to cause the Chinese economy issues in the first quarter of 2020. This is thought to have been a major part that has caused the USD to reach a 4-month high on the AUD.
The Yen and Swiss franc have seen gains towards the end of last week as fears escalated over the coronavirus. This could be something to keep a close eye on over the next week as more cases are announced over the world, it could see people heading towards more 'safe haven currencies', like the yen or franc.
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