Brexit has been the defining factor for sterling in the last few years, and September offers plenty of events which could prove important. Firstly, the MPs return from their summer recess on the 3rd, when Jeremy Corbyn has indicated he might be calling a vote of no confidence. With Boris Johnson only having a majority of one, the vote could easily go against the new Conservative Prime Minister. The market will be looking to better understand the outcome from Brexit, with just 61 days from September 1st left until the October 31st deadline agreed in March. As it stands the UK will leave the EU on that date, and the market has been pricing in the possibility of the UK leaving on a ‘no-deal basis.
Looking at the last 3 General Elections in 2010, 2015 and 2017, the pound did lose value ahead of the votes. Though past performance is no firm indicator of what lies ahead, it does provide a guide to the type of increased volatility that might be expected around such an event. Debate is raging as to when the election would take place, if indeed one gets called. Betting markets, sometimes a useful guideline to outcomes, are at the time of writing suggesting between 66% and 80% chance of a General Election in 2019.
Sterling proved its continuing sensitivity to headlines on Brexit with some volatile days in August, September may offer similar conditions. September 6th is an important date, then a court hearing will be held on the legality of allowing the government to ‘prorogue parliament. Proroguing effectively ends the parliamentary session and would prevent MPs blocking a no-deal Brexit.
Economic data is still a factor to be considered for the UK, particularly because of how it might influence the Bank of England (BoE) in any decisions on interest rates. The monthly Purchasing Managers Index (PMI) surveys; Manufacturing on the 2nd, Construction on the 3rd and Services on the 4th provide a snapshot of the latest performance in these areas and might influence the Bank of England. Monday the 9th sees the latest monthly Gross Domestic Product (GDP) data and Tuesday 10th Unemployment data, all important information ahead of the 19th September Bank of England decision. Whilst the UKs Central Bank might not be expected to make changes to current policy, any hints to future thinking could be a factor on sterling rates.
The raising and lowering of interest rates can influence the currency markets, by making a currency more attractive to hold when interest rates are higher, and less attractive when rates are lower. With Central Banks around the world cutting rates based on global growth fears, it will be interesting to get Mark Carney and his teams latest take on how the British economy is faring during these times.
The 30th will see the Quarterly GDP sets released too, which could be an interesting time. The UK seems to have narrowly avoided a recession but this could all change quickly. For September, developments on Brexit appear bound to attract attention, as the market continues to seek clarity on what kind of Brexit is likely, and see if it is even still possible. The threat of a General Election being called, plus the Bank of England commentary are also situations to monitor.
If you have a sterling transfer ahead get in touch with our a member of our team today and we can keep you updated with the latest market updates that could impact exchange rates.
The euro has been facing increasing pressure in 2019, both of a political and economic nature, as well as global events like the Trade Wars and Brexit weighing on confidence. The euro will have some important events to contend with in September, perhaps one of the top tier events being the latest European Central Bank (ECB) meeting on the 12th September. There has been mounting speculation in recent weeks that the ECB will cut interest rates or extend their Quantitative Easing (QE) program, both of which by economic theory would see the euro weaken but this is by no means guaranteed. Increased volatility for the euro is possible and any weakness may well be currently factored into the current price however, preventing further deterioration.
Political pressures are also high, with the Italian Prime Minister resigning in August. There are suggestions that there could be elections in October or November, as the current President of Italy, Sergio Mattarella holds the key to the next decision. He might allow the resigning President Conte to have another go at forming a government, or elections could be looming too. Italian debt is still rather considerable, second only to Greece in the Eurozone. This situation could be one to monitor in September, as political uncertainty often weakens the currency concerned.
The 4th of September is the latest Eurozone Retail Sales data and Markit Purchasing Managers Index (PMI) data, and then 6th September is the latest Gross Domestic Product (GDP) news. This will all be helpful for the ECB in making their assessments of the Eurozone economy and what lies ahead. The ongoing political concerns in the Eurozone from Italy could put more pressure on the ECB to act to stave off a recession. There are continued global issues too which we need to be conscious of, including the Trade Wars with Donald Trump. Following the meeting with G7 leaders at the end of August, there was some renewed optimism that leaders may try to find some common ground to help improve global trade conditions. However, the threat of a slowing economy is a big pressure on the ECB and the Eurozone, and is a subject being continuously referenced by the ECB.
The latest ECB decision on Thursday September 12th appears to be a key release for this month on the euro. If you have a euro transfer ahead to consider and wish for the latest news on this event, feel free to get in touch with the team at Foreign Currency Direct to discuss further.
The US dollar has been driven largely on sentiment regarding the Trade Wars, with news of escalated tariffs from China at the end of August seeing the US dollar weaken. This is because of increasing concerns regarding the outlook for the US economy. As a result, the perceived deterioration in the Trade Wars raises the prospect of further interest rates cuts from the US Federal Reserve (Fed).
September will see continued attention on the Trade Wars, and there could follow continued volatility for the US dollar as the market continues to try to understand the impact on the US and global economy.
There is a link being established between the Trade Wars and the decisions made by the Federal Reserve Bank with regards to interest rates. Expectations on whether or not the Fed will cut rates could also be linked to Donald Trump who has also been wading into the debate pointing out the US has the highest interest rate of any leading nation, and in his opinion should be 1% lower. There is supposed to be a clear separation of powers between the President and the Fed with regards to US economic policy, for fear of politicians engineering the economy to their own personal gain. With the next US Presidential election just over a year away, in Autumn 2020, markets may begin paying more attention to this prospect.
Friday 6th September will see the latest US Non-Farm Payroll figure released, one of the highlights of the monthly economic releases on the US dollar. There is often a period of increased volatility for the US dollar around this time, as it provides markets with information readily monitored by the US Federal Reserve. Often setting the tone on the US dollar for the early
part of each month, it will also form a basis for discussions at the actual US interest rate decision which will be due on the 18th September. Previously held views that whilst another cut was coming, it might have been later in the year, could be scrutinized at this meeting.
Other data will see Retail Sales Fri 13th September, plus US GDP on the 26th September. In the currency markets, expectations on interest rates can be a big driver, and the Trade Wars are a factor influencing this. September will contain some key events to affect the US dollar, if you have a transfer ahead then please do get in touch to discuss.
The Australian dollar has been losing some ground entering September, partly owing to the increased uncertainty of the Trade Wars and global trade tensions. The Australian currency is very sensitive to changes in the global economic outlook which can weigh on the market. Ahead in September, it will be very important to monitor the Reserve Bank of Australia (RBA) and possible rate cuts ahead, as well as of course the trade wars and how these might influence monetary policy in the future.
The RBA will be meeting on the 3rd September, in the early morning to discuss monetary policy. Previous conversations from the RBA have indicated that the Australian Central Bank were in a ‘wait and watch mode, to see what was happening in the currency market. With the trade tensions having escalated at the time of writing, there may be increased pressure on the RBA to signal their stance and what lies ahead for Australian interest rates.
Whatever the RBA do decide to do, attention should remain on the economic data releases coming from Australia, which will provide some insight into what we can expect ahead for the economy. If the RBA has cut rates by this point, further economic data will be seen through a lens of whether or not it was a good idea and are further cuts needed, whilst if they havent, market focus might remain on the likelihood of this happening down the line.
Other Australian economic news which might be a factor to influence the Aussie would be 4th September and Australian GDP data before Sunday 8th and the latest Import / Export and Trade Balance data from China, which might attract attention. In August this data saw some movement for the Australian dollar as it shed light on how the Trade Wars are influencing the Chinese economy. China is Australias largest export destination so changes to sentiment on the Chinese economy are a big factor for the Aussie, accounting for 29% of Australian exports.
On the same day we will also see Japanese GDP data, and with Japan being Australias second largest export destination at 10%, any news on the Japanese economy may also influence the Australian dollar. Tuesday 10th is Chinese Inflation data, before the RBA Meeting Minutes which are released on the 17th followed by Australian Employment data Thursday 19th. There is also the Bank of Japan (BoJ) Interest rate decision, which might influence the Australian dollar, owing to the close trading relationship the countries share.
Trade tensions and uncertainty over the global economy have been big reasons for volatility on the Australian dollar, any clients wishing to discuss the latest news should feel free to contact us to discuss this ever-changing situation further.
If you are considering a currency transfer, buying a property abroad or looking to bring funds back to the UK from overseas, 2019 has a number of potential events which could create some excellent opportunities for well-prepared buyers and sellers.
In any event, our currency experts are on standby to answer any of your questions, so feel free to call our trading floor on 01494 725 353 if you would like to discuss a transfer.
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