Money mat­ters

Our ex­pert takes a look at the cur­rency trends across the world

Living France - - Contents -

With ster­ling con­tin­u­ing to be mired in volatil­ity, and gen­er­ally of the neg­a­tive kind over the past 18 months, it is some­times bet­ter to take a wider view of what is go­ing on in the world, and how other coun­tries and cur­ren­cies are far­ing in their ex­change rates when buy­ing and sell­ing eu­ros. There is a lot hap­pen­ing in the UK as well, but it is im­por­tant to look around our now global vil­lage for fac­tors that af­fect us all.

Firstly, a look at the con­ti­nent it­self, as this af­fects all euro ex­change rates. The euro as a cur­rency seems re­mark­ably strong for the first time in a long time, and is ar­guably the strong­est of all the ma­jor cur­ren­cies for the first time in its his­tory. With Greece stay­ing out of the head­lines, and Ital­ian banks be­ing propped up by the gov­ern­ment, it seems like the two big­gest risks to the sur­vival of the sin­gle cur­rency are over for now.

Look­ing at the wider pic­ture on the con­ti­nent, economies in most coun­tries are con­tin­u­ing to ex­pand, and at a faster pace than at least the UK.

PRES­I­DEN­TIAL PROM­ISES

We have seen the pres­i­den­tial elec­tion in France re­sult in the se­lec­tion of a new leader promis­ing a new cen­trist brand of lib­er­al­ism, which has been wel­comed by an­a­lysts from across the po­lit­i­cal spec­trum, and Pres­i­dent Macron holds a high ap­proval rat­ing among the French pop­u­la­tion. With the elec­tion of a new pres­i­dent in Ger­many be­fore the end of the year too, that is also likely to spur on new pos­i­tiv­ity, whether we see the re-elec­tion of Merkel, or an­other can­di­date come to power. Elec­tions are typ­i­cally a bit of a hand­brake on eco­nomic ac­tiv­ity, as peo­ple, par­tic­u­larly in France, put off mak­ing big life de­ci­sions such as mov­ing home. This was cer­tainly re­flected in May as we saw an uptick in such ac­tiv­ity fol­low­ing the Macron vic­tory.

Across the At­lantic, Don­ald Trump is clos­ing in on the end of his first year in of­fice, and it has been event­ful, if some­times in­ef­fec­tive. While many of his rad­i­cal pro­pos­als such as the bor­der wall and Mus­lim ban have been wa­tered down sig­nif­i­cantly or scrapped, he has had some suc­cess in re­peal­ing leg­is­la­tion that is seen as ob­struc­tive to busi­ness. While this has strength­ened the US dol­lar, the pres­i­dent has long stated that he wants the US cur­rency to be weak, giv­ing US com­pa­nies a trad­ing ad­van­tage around the world. In the long term, if he con­tin­ues to pur­sue this pol­icy, he is likely to find a way of talk­ing down the dol­lar, even if it does come via Twit­ter! We can also not rule out the pos­si­bil­ity of an im­peach­ment, as the var­i­ous Rus­sian scan­dals seem to refuse to go away.

THE BREXIT EF­FECT

Back to home shores, the in­vo­ca­tion of Ar­ti­cle 50 has kept ster­ling on the back foot, and the snap gen­eral elec­tion an­nounce­ment and re­sult did not help things to sta­bilise. We are set to see con­tin­ued volatil­ity ev­ery time we see a sig­nif­i­cant pub­lic state­ment from a stake­holder, whether that is the Brexit sec­re­tary in the UK, or his coun­ter­part from the EU. At the time of writ­ing this piece, Theresa May is the Prime Min­is­ter, though most an­a­lysts do not ex­pect her to fight an­other gen­eral elec­tion, with some book­mak­ers ex­pect­ing Jeremy Cor­byn to be tak­ing up res­i­dence in Down­ing Street at the next elec­tion, whether that comes in five years, or sooner.

Po­lit­i­cal tur­moil is typ­i­cally neg­a­tive for a cur­rency, and mar­kets crave sta­bil­ity, reg­u­larly pun­ish­ing the kind of dishar­mony we have seen over the last few years. On a more ba­sic eco­nomic level, we are see­ing the UK start to post some poor data re­leases. The medi­umterm look­ing data (known as PMIs) is

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