Our expert takes a look at the currency trends across the world
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.
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
SEE CAMBRIDGE GLOBAL PAYMENTS ON STAND 20 AT