2019 Currency Review: GBP Exchange Rates Rocked by a Year of Brexit Chaos

Pound (GBP) Struggles to Find Stability as Brexit Dominates

The Pound (GBP) experienced plenty of dramatic swings in 2019 as the Brexit headlines came thick and fast, overshadowing almost everything else this year.

Three missed deadlines, two Prime Ministers, and one general election ensured there was plenty to keep GBP investors on their toes over the last twelve months and infuse significant volatility into Sterling.

The Brexit uncertainty also fed into an uneven economic performance this year, with Brexit stockpiling driving a surge in growth at the start of the year, but giving way to a shock contraction in second quarter as these inventories were unwound.

Euro (EUR) Undermined by Gloomy Outlook

The Euro (EUR) was characterised by broad weakness in 2019, with the currency giving ground against most of its peers amidst signs the Eurozone economy was slowing.

Stubbornly low inflation and some underwhelming PMI figures exerted much of the pressure, but it was fears of a recession in Germany which really galvanised the EUR sell-off this year.

The Euro also fell victim to political uncertainty over the past year. This was partly due to Brexit but was also a result of drama over Italy’s 2020 budget proposal and the collapse of its coalition government over the summer.

US Dollar (USD) Firms on Safe-Haven Demand

The US Dollar (USD) enjoyed broad support through 2019, mostly as a result of jittery investors flocking to the safe-haven currency amidst heightened geopolitical tensions.

A key contributor to these tensions was the US-China trade dispute, which weighed heavily on global growth and spooked investors amidst repeated tariff hikes.

However the US wasn’t immune to the slowing of global growth, with the US Dollar facing some headwinds through the latter half of the year as the Federal Reserve embarked on a series of rate cuts in order to sustain the US economy’s momentum.

Canadian Dollar (CAD) Fluctuates in Line with Oil Prices

The Canadian Dollar (CAD) has heavily influenced by oil prices over the last year, with the commodity-linked currency trading in a wide range as it tracked the many fluctuations in crude prices.

However the ‘Loonie’ also found some support from the Bank of Canada (BoC) over the past year as the bank bucked the prevailing trend by not easing its monetary policy in 2019.

Australian Dollar (AUD) Tumbles amid Market Caution

The Australian Dollar (AUD) came under pressure in 2019 as investors shied away from the China-proxy ‘Aussie’ amidst concerns over the US-China trade dispute.

Further pressuring AUD exchange rates was the Reserve Bank of Australia’s (RBA) decision to cut interest rates to 0.75%, a new record low.

New Zealand Dollar Slumps on RBNZ Rate Cuts

The New Zealand Dollar (NZD) fell back this year as the Reserve Bank of New Zealand (RBNZ) also lower interest rates to a record low in an effort to simulate the domestic economy.

Like other risk-sensitive currencies, the ‘Kiwi’ also suffered due to the cautious mood in markets in 2019, with heightened geopolitical uncertainty taking its toll on NZD exchange rates.

Matthew Andrews

Contact Matthew Andrews