Major market movements in October 2017It’s been a busy start to October on the currency front, with politics being the key driver of market movements. This week alone, the leaders of the European Union met at the European Council Summit in Brussels (Thursday 19th), while UK inflation data was released Tuesday the 17th. Below we look at the currencies that have seen the biggest market moves so far this month, and other dates to note in your currency diary.
UK SterlingIn early October, the Conservative Party conference and another round of Brexit talks dominated the headlines. Uncertainty around the negotiations was followed by a weakening of the Pound Sterling. However, last week GBP jumped against the US Dollar – to $1.3263 against USD and to €1.1252 against EUR with CurrencyFair (October 17th) – after reports of the EU extending a Brexit transition offer. This week’s release of inflation data confirmed UK inflation came in at 3.0% last month – the highest since 2012. This could push the Bank of England to announce higher interest rates to counter this hike in inflation, which is now a full 1.0% higher than the target level they are legally obliged to maintain. We will see the Pound Sterling being less affected by political events as we progress through mid-October. However with the Bank of England’s “Super Thursday” meeting on November 2nd, there are more potential twists and turns still ahead.
EuroAnother currency rallying against political volatility is the Euro. It has battled against the upset caused by the Catalonian vote, the German election and Brexit talks – dropping to 1.1674 against the Dollar (as of October 7th) and 0.8875 against the Pound (as of October 14th) with CurrencyFair. With the Spanish government giving Catalonia a new deadline of Thursday October 19th to cease their pursuit of independence, the single currency is expected to recover this month now that political tensions have relaxed and anti-EU sentiment is subsiding. Still, interesting times are ahead for the European Union and its single currency. The recent win by Sebastian Kurz of the Austrian People’s party (ÖVP) has set him on path to becoming Austrian prime minister and the youngest leader of an EU nation, marking a societal shift to the right in Austria. This, along with the Catalonian vote for independence, will continue to test the Euro over the coming months. However analysts report that unless the decision “needs involvement from Brussels”, such events are unlikely to have an effect on euro policies.
Australian DollarThe Australian dollar has seen a boost this week, driven by US investors. Last week saw the release of a weaker-than-expected US inflation report for September. Hurricane Irma and Harvey caused US fuel prices to rise, raising overall inflation. The US core CPI (Consumer Price Index) number had a lacklustre 0.1% increase in September, falling short of the predicted 0.2%. These weak results saw US investors turn to the higher yields offered by the AUD. It held its own against the USD hitting 0.78 with CurrencyFair (as of October 16th) – its highest level since September 26th.* Sterling is also struggling against the Australian Dollar this week, dropping to AUD$1.68 (as of October 16th) from its October 13th high of AU$1.6945 that was available with CurrencyFair.
Important dates for your diary:
- ECB President Draghi speaks in Frankfurt – Wednesday October 18th
- Canadian CPI released / AUD Employment Figures released – Thursday October 19th
- European Council Summit – Thursday/Friday October 19th & 20th
- Chairman of Federal Reserve Yellen speaks on US monetary policy – Friday Oct 20th
- Australian CPI released – Wed Oct 25th
- European Central Bank rates decision – Thursday Oct 26th