2019 outlook – Brexit, Brexit, Brexit

Philip McHugh December 28th 2018 - 2 minute read

This morning the GBP/EUR exchange rate is trading in the region of €1.1038 and the GBP/USD exchange rate is fluctuating around $1.2648. GBP/AUD is achieving AU$1.7934 while GBP/NZD is trading at NZ$1.8851.

As we prepare to say goodbye to 2018, we’ve taken a look at what we can expect from the pound, euro and US dollar in the year ahead…

UK to leave the EU in 2019

The UK voted to leave the EU way back in 2016, and almost three years of negotiations, recriminations and political upheaval have been building up to the nation’s exit on March 29 2019.

With the exit deadline almost upon us, Brexit will remain the main catalyst for GBP exchange rate movement in the weeks and months ahead.

The pound could fall against the other majors in the first quarter of 2019 if the odds of the UK leaving the EU without a deal increase, as a ‘cliff edge’ Brexit could have a negative impact on trade and the UK economy.

However, if the PM manages to overcome the current hurdles and facilitate an unexpectedly smooth withdrawal from the EU, the pound could spend 2019 recouping losses.

Eurozone growth in focus

Euro exchange rates could struggle to exert themselves in 2019 if concerns about economic output in the Eurozone continue.

Disappointing data releases are likely to keep the euro on the back foot as they will reduce the likelihood of the European Central Bank (ECB) taking a more hawkish approach to monetary policy over the course of the year.

Conversely, a pickup in Eurozone data and any hints from the ECB that a rate hike could be on the horizon would be euro-supportive.

Is the US economy strong enough to stand more rate hikes?

The US dollar was one of the currency winners of 2018, gaining on all the majors. But is its strength expected to continue?

The Federal Reserve hiked interest rates four times over the course of this year, and it looks like the central bank plans to raise borrowing costs further in the year ahead.

But, while some believe two more adjustments are on the cards, other industry experts are questioning whether the Fed should bring an end to its rate hiking cycle.

Concerns that additional rate hikes could undermine the US economy may apply some pressure to the US dollar over the next 12 months.

That being said, slowing global growth, political uncertainties and a risk-off attitude could continue underpinning USD exchange rates. 

Written by
Philip McHugh

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