08 Dec 2017 ·

Looming Brexit deadline leaves GBP unsettled, ECB decision ahead...

November 2017 currency chart

Staying on top of the latest currency news can help you time your transfers more effectively, so find out what you should be looking out for over the next couple of weeks...

Latest currency news

Over the course of November the GBP/EUR exchange rate fluctuated between highs of €1.14 and lows of €1.10, before ultimately closing the month at €1.13.

EUR/GBP shifted between £0.87 and £0.90. Meanwhile, GBP/USD steadily climbed from $1.30 to $1.35.

What's been happening?

Although the UK budget turned out to be something of a non-event, the pound spent the second half of November strengthening on the hope that the UK would make enough progress on key Brexit issues to move on to trade talks before the end of the year.

Reports that Prime Minister Theresa May had significantly upped her offer for the Brexit ‘divorce bill' were encouraging, and everything appeared to be going well, until the beginning of December when the issue of the Irish border reared its ugly head. Concerns that this particular sticking point won't be resolved in time for the December EU summit drove the pound from its best levels.

The euro, meanwhile, proved resilient in spite of the collapse of coalition talks in Germany.

However, below-forecast inflation data and disappointing retail sales figures applied pressure to the common currency later in the month as the reports added to the argument in favour of the European Central Bank (ECB) maintaining an accommodative stance on monetary policy.

The US dollar experienced a volatile few weeks of trading, alternately gaining on optimism for President Donald Trump's tax reforms and declining on concerns surrounding the Trump-Russia probe.

What do you need to look out for?

The last few weeks of 2017 are set to be jam packed with currency volatility.

Focus will remain firmly on Brexit negotiations and whether the UK has made enough progress in key areas to start discussing the nation's post-Brexit trade relationship with the EU and a transitional deal.

The EU summit on the 14th/15th December will be crucial. A positive outcome from this gathering could send the pound shooting higher, while further setbacks would leave Sterling struggling heading into the New Year.

We also have three influential central bank meetings to contend with, starting with the Federal Reserve's on the 13th.

The odds of the Fed raising interest rates at this gathering have sat at over 90% for months, so an increase in borrowing costs might not give the US dollar much of a boost when it occurs.

In fact, if the Fed is cautious on the future path of monetary policy and implies that rate hikes might not be so frequent in 2018 the US dollar could tumble, sending the euro higher in the process.

14th December sees both the Bank of England (BoE) and European Central Bank (ECB) delivering interest rate decisions.

The BoE increased borrowing costs for the first time in over a decade in November, but implied that we shouldn't expect another adjustment for some time. If policymakers are similarly cautious this time out it would weigh on demand for the pound – although the impact of the decision is likely to be limited in light of the EU summit.

The ECB rate announcement is also unlikely to result in any adjustments to monetary policy, so any euro movement will be the result of hints for the future. Whether or not the euro is able to end the year on a high is in President Mario Draghi's hands...

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