Pound to US Dollar Exchange Rate Climbs 11 Cents in 2017
During 2017 the Pound has appreciated by around 11 cents versus the US Dollar.
While progress in the Brexit talks and sanguine domestic data has helped prop-up demand for Sterling, the main driver behind the gains in ‘Cable’ appears to be a lack of faith in US President Donald Trump’s policies.
The ‘Greenback’ strengthened when Trump was elected on a platform of huge infrastructure spending and tax relief.
However, the US President was unable to pass the spending programme and the muted reaction to the recent tax bill suggests that traders are sceptical as to how much influence the tax cut will have on Federal Reserve policy.
The Fed currently forecasts three further 25-basis point rate hikes in 2018; however, there is potential for more aggressive tightening when Fed President Janet Yellen passes the baton to Jerome Powell in March.
If the incoming Fed President employs more hawkish rhetoric then we could see the US Dollar mount a recovery during the first few months of the year.
Pound to Euro Exchange Rate in 2018 Depends on Central Bank Responses to Inflation
The Pound reached its highest level against the Euro during April, when fears that Marine Le Pen could become President of France weighed on the single currency.
Investors sold the Euro in their droves, taking GBP/EUR up to a 2017 high of 1.20, due to concerns that, if elected, the far-right, anti-EU Le Pen would attempt to take the currency bloc’s second-largest economy out of the Eurozone and out of the European Union.
Sterling softened following market-friendly Emmanuel Macron’s victory in the French Presidential election and GBP/EUR eventually slid to a 10-month low of 1.07 in August when the Bank of England (BoE) disappointed traders by leaving interest rates on hold.
The BoE later hiked rates, helping the Pound rise to 1.12 by the end of the year.
Over the next 12 months it will be interesting to see how the European Central Bank (ECB) responds to persistently low inflation and how the BoE reacts to overshooting inflation.
Brexit concerns are likely to limit BoE rate rises, but the single currency could suffer if the ECB decides not to reduce its bond-buying scheme in the second half of the year.
Pound to Canadian Dollar Exchange Rate Seeks BoC Clarity in 2018
After hitting an 11-month high of 1.78 at the start of May, the Pound to Canadian Dollar exchange rate drifted lower to end the year at 1.69.
The Bank of Canada has remained aloof regarding its plans for interest rates in the New Year. This means there is potential for a significant demand for the ‘Loonie’ if the central bank starts hinting at rate rises; conversely, a dovish message could drag on the high-beta currency.
Pound to Australian Dollar Exchange Rate to Enter 2018 on Bearish Trend
Progress in the Brexit talks helped boost Sterling to a 17-month high of 1.80 against the Australian Dollar at the start of December. However, since then the Pound has shed over seven cents against the ‘Aussie’.
With GBP/AUD on a bearish run, there is every chance that Sterling could continue to soften versus the Antipodean currency during the first few months of the New Year.
Pound to New Zealand Dollar Exchange Rate Up 12 Cents This Year
The Pound to New Zealand Dollar exchange rate is up 12 cents on the year, but the ‘Kiwi’ Dollar has rallied by around nine cents over the last month. Rising commodity prices mean that the commodity-correlated ‘Kiwi’ could drive higher in the New Year.