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Pound US dollar exchange rate tumbles following emerging market sell-off

currency-newsPound US dollar exchange rate tumbles following emerging market sell-off

The pound fell to a new 13-month against the US dollar at the end of last week as a collapse in the Turkish lira saw investors flock to USD.

Trade in Sterling appears muted at the start of this week’s session, with GBP/EUR flat at €1.1196, GBP/USD subdued at $1.2747 and GBP/CAD stable at C$1.6760. Meanwhile GBP/AUD and GBP/NZD are holding steady at AU$1.7506 and NZ$1.9363 respectively.

A fairly quiet start to the week in terms of data may leave trade fairly thin today, barring any major Brexit or US trade headlines of course…

What’s been happening?     

Trade in the pound was mixed at the end of last week’s session as investors reacted to the UK’s latest GDP figures.

The ONS reported that UK growth rebounded from 0.2% to 0.4% in the second quarter as the sunny weather and World Cup helped to bolster spending.

However, with markets appearing largely unfazed by the data this left Sterling to be driven by movement in other currencies.

This saw the GBP/EUR exchange rate edge higher on Friday as the euro was weakened by a report in the Financial Times that the European Central Bank (ECB) is concerned about the Eurozone’s exposure to Turkey’s current financial woes.

With the Turkish lira falling as much as 20% on Friday these concerns were at the forefront of many traders’ minds.

Meanwhile, the sell-off of the lira cast the GBP/USD exchange rate down to a new 13-month low at the end of last week’s session as spooked investors sought safe harbour in the US dollar.

However, slightly limiting the US dollar’s gains was the release of the latest US CPI figures as headline inflation missed expectations.

What’s coming up?

Looking ahead to this week’s session, if the pound finds some respite from the recent deluge of gloomy Brexit headlines then it may begin to tick higher on the back of the UK’s latest CPI figures, with economists forecasting that inflation will have risen in July.

Then again with the Bank of England (BoE) not expected to raise interest rates any time soon, the rise in inflation may do little to support GBP.

The euro, meanwhile could suffer at the start of this week as the Turkish currency crisis continues to rattle markets, with fears Turkey’s financial woes could spread to European markets.

Finally, with US data looking thin on the ground this week, movement in the currency may continue to be dominated by safe-haven demand, especially if trade tensions between the US and China escalate.  
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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