European elections, escalating trade wars and changes to central bank monetary policies, some of the key upcoming events in June that may affect exchange rates. Read on for information impacting the pound, euro, US dollar and Australian dollar for our thoughts on when to transfer currency.
The pound struggled in May as it became increasingly more apparent that expectations of an agreement between the Labour Party and the Conservatives had faltered. With the performance of the pound remaining closely linked to the outcome of Brexit, sterling is unlikely to remain too settled in June. At the time of writing, the plan is for Mrs May to try and push through her Brexit Withdrawal Bill for a fourth time, with expectation she might then resign (or be forced to), if it fails.
Sterling will also be at the mercy of the final outcomes from the European elections as results are published at the end of May, with the expectation that this will have shown a poor performance for the Conservative Party, thereby heaping further pressure on Theresa May and the Conservative Party. Sterling could enter June in a weaker position compared to the highs of 2019, with the added possibility further uncertainty could hamper its performance as the market struggles to understand the detail surrounding Brexit.
The promise of a further vote on the EU Withdrawal Bill by Theresa May in June, could see the pound under more pressure, particularly as it could be linked to her resignation. The 1922 Committee who represent various backbench Conservative MPs is also seeking ways to force Theresa May to resign, since a vote of no confidence in her cannot be officially called until December. Boris Johnson and others have been linked to the role which could see sterling lower as it presents the market with a greater chance of no-deal, the type of Brexit Boris is seeking.
Economic data has been more impressive with the pound rising in June on the back of news that UK Gross Domestic Product (GDP) data was better than expected for Q1 of 2019. We will have the latest update from the National Institute of Economic and Social Research (NIESR) on GDP for the 7th June, whilst Tuesday June 11th is the latest UK Unemployment data. In terms of other economic data to monitor, Monday June 10th UK will be further GDP data from the Office of National Statistics (ONS), whilst Wednesday June 18th is UK Inflation. All of which could prove important in directing short-term movements for the pound and the currency.
A very key date for the diary on UK economic data will be Thursday June 20th with the latest Bank of England Interest Rate decision and Minutes. Sterling could benefit further if Mark Carney discusses again his plans to potentially raise interest rates in the long term owing to improving economic data, and if, Inflation is rising. Where the uncertainties of Brexit had seen confidence of the UKs economic outlook lower, sterling may benefit if it transpires the forecast and economic data support a slightly more positive view ahead.
The pound could struggle further in June as the uncertainty created by a turbulent European election, presenting further questions regarding the political direction for the UK. The possibility of Theresa May being forced to resign, or a fresh vote of confidence being called, if her Brexit Bill fails, is also an important hurdle for the pound to clear in June.
The main events which could help sterling rise in June will be an overly confident Bank of England or the smooth passage of Theresa Mays EU Withdrawal Bill, both of which appear unlikely to manifest. Should these events take place, then sterling may rise but banking on this to happen might ultimately prove costly. If you have a transfer to consider and wish to discuss the latest news and forecasts, please dont hesitate to contact our expert team for insight and information.
The euro is slightly weaker as we enter June, as the prospect of the escalated trade wars, and the fallout from the European elections weighs on the single currency. The European elections which are still to be finally decided at the time of writing, seem destined to reignite fresh questions over the ultimate direction for the European Union, and the Eurozone to be taking in the future, thereby weighing on the euro.
The euro has generally been weaker in 2019 as a slightly less well performing Eurozone economy, fails to meet the high expectations which had previously been set in 2018. The European Central Bank will meet in June to discuss their latest interest rate decision, this could be an important time to be monitoring euro exchange rates as the market evaluates their latest comments and forecasts.
The euro is being driven by various domestic factors including the changing economic sentiments towards the single currency bloc. Expectations for the euro will continue to be driven by any changes in the data, Tuesday June 4th sees the latest Inflation and Unemployment data which will provide a snapshot of the economy and might influence the value of the euro. We then have Eurozone GDP (Gross Domestic Product) data due for Thursday June 6th and quite importantly the latest ECB meeting.
The latest ECB Interest rate decision and Monetary Policy Statement will perhaps be the most important event for us to be monitoring in June. This will provide a snapshot of how the ECB is viewing the current economic climate for the Eurozone. There has been a general decline in the economic performance in the Eurozone, with Germany notably struggling of late. Whilst the German and Eurozone growth stats did show a slight rebound for the first quarter of 2019, there are still many concerns ahead. The ECB who had previously been committing to raise interest rates in the future, have now been extending a previous ‘looser monetary policy which has had the net effect of weakening the euro. With there appearing a gap between what the ECB believes lies ahead, and what the market feels, the euro could be sold off.
The euro has also been weaker because of the more global concerns on trade wars, where Donald Trump has been threatening to increase tariffs on the European automotive industry. The increase in escalation of the trade wars between the US and China has been a concern for the euro, as a decline in the global economy will only weigh on the global sentiments which will affect the euro. The ongoing saga of the trade wars looks set to continue in June and should continue to be a thorn in the side of the euro, in my opinion.
The euro could struggle to make too many gains in June, as the fallout from the European elections continues and investors continue to see a lack of economic progress hampering the ECB and therefore any advances by the euro.
The US dollar found some form in May as investors sought the safety and security of the greenback, against uncertainty and lack of clarity elsewhere. Despite the escalation in the trade wars seeing the US dollar initially weaker, the belief that the US economy will come off the best from the dispute has increased confidence in the currency.
June is a key month with the latest US interest rate decision due on the 19th , where investors will be eagerly monitoring the commentary from the US Federal Reserve, to see if there are any further hints to future monetary policy. Domestically, the US is in healthy shape despite the lack of clarity over the trade wars, with growth and unemployment low. The US dollar also benefits with the US having the highest interest rates amongst the worlds leading economies. For June, it looks like the currency may continue to be strong in its performance.
In terms of important news to move the market on US dollar exchange rates, Friday June 7th sees the latest IS Non-Farm Payroll (NFPR) and Unemployment data released which will provide insight into the health of the US labour market. A notoriously volatile release, the NFPR data will provide a snapshot of the change in non-agricultural employment. The previous release of 263k new jobs being created helped the US dollar to retain strength in May and a continued strong number could help the dollar to remain strong.
Other important news will be Wednesday June 12th with the release of the latest US Inflation data, and then Friday June 14th Retail Sales will also be tracked for signs of the health of the US economy. Expectations for the future centre around whether the US Federal Reserve will be looking to raise or cut interest rates, Wednesday June 19th sees their latest Interest Rate decision and Monetary Policy Statement to be released. The US currency may benefit from the decision, as a fairly upbeat Fed keeps investors satisfied the US dollar is the most attractive currency to be holding of late.
Later in the month, Thursday June 27th will see the release of US Gross Domestic Product (GDP) data, which will provide more data for assessment from the Fed. The current direction of the US economy is still very positive, despite the trade wars weighing on economic sentiment. In the coming months we might well see a change in tone, but for June the US dollar may continue to remain strong.
The Aussie dollar looks to be in a stronger position entering June, following the surprise result of the May election. With the Labour Party, predicted to win but losing to the Liberals, the currency found form in the back end of May as investors felt more reassured by the continuation of the existing government. The familiar issues of trade war concerns and a worsening economy are likely to weigh on sentiment for the Australian dollar in June, with a real prospect of the currency weakening again once the dust has fully settled from the elections.
May was initially a challenging month for the Australian dollar with the outlook suddenly reversing according to sentiment. June might well continue to offer some turbulence on the Australian dollar rate, as the market gauges its views on where events will take us next.
A principal reason for weakness on the currency was the prospect of the Reserve Bank of Australia (RBA), cutting their base interest from the current 1.5%. There is a reasonable chance the RBA will cut interest rates when they meet on Tuesday 4th June, with the RBA Interest Rate decision and Monetary Policy Statement. The raising and lowering of interest rates will influence the relative strength and weakness of a currency, a higher interest rate usually means a strong currency, whilst a lower interest rate will often mean a weaker currency.
That week is also key for the Australian dollar with Wednesday June 5th seeing the release of the latest Gross Domestic Product (GDP), data from the Australian economy. One of the reasons for speculation of a rate cut has been the performance of the economy which has been faltering in many respects. Inflation was seen at a 16 year low recently which has only put further pressure on the RBA to consider a rate cut.
Other important data is Wednesday June 12th with the latest Chinese Inflation data. Chinese economic data is a key driver for the Aussie since China is the largest trader partner for Australia, any shifts in sentiment for the Chinese economy will often be reflected in the behavior of the Australian dollar. Other key data will be the RBA Meeting Minutes June 18th and then Thursday June 20th Australian Unemployment rate, where once again the market can obtain a snapshot of how the economy is performing.
Another large factor on the Australian dollar rate is the outlook for the trade wars, their deterioration in May saw a sell-off for the AUD. Whilst the immediate fears were tempered, the longer-term outlook is that the trade wars may continue to intensify and will therefore put more pressure on the global economy. As a commodity currency, which reacts strongly to global attitudes to risk and trade, the Aussie is unlikely to perform well in such an environment.
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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