As an eventful 2016 draws to a close we take a look at the movements of the major currencies this past year and make some predictions for 2017.
The Pound (GBP) saw the most dramatic movement of all the major currencies this year as Britain’s vote to leave the EU back in June caused Sterling to plummet. The Pound has struggled to recover ever since as investors remain fearful of the uncertainty ‘Brexit’ casts over the UK economy.
Looking forward into 2017 it is difficult to tell in which direction the Pound will move as we wait to hear of Theresa May’s plans for negotiations with the EU and whether the government will pursue a hard or soft ‘Brexit’. Access to the single market will remain investors main concern heading into the New Year.
The Pound Euro (EUR) exchange rate was heavily impacted by ‘Brexit’ and even saw analysts speculate that the currency pairing would reach parity by the end of 2016 shortly after the Sterling flash crash in October.
While a rally for the Pound in the November prevented this, there remains a high chance that GBP EUR could reach parity sometime in 2017 if the UK government shuns access to the single market. However, the Euro may also stumble next year as the recent rise of populism across Europe threatens the political norm with a number of countries planning to head to the polls.
After hitting a 31-year low, ‘Cable’ has clearly not had one of the best years as the Pound suffered after the vote for ‘Brexit’. Meanwhile the election of Donald Trump as the next US President did not have a similar impact on the US Dollar (USD) despite widespread predictions that the ‘Greenback’ would suffer ‘Brexit’ level losses.
With markets reacting positively to Trump’s plans for economic growth through increase infrastructure spending and job creation, it is likely that the US Dollar will rally further against the Pound in 2017, especially as Sterling faces the challenges of ‘Brexit’.
‘Brexit’ caused the Pound to fall by over 40 cents against the Canadian Dollar (CAD) in 2016, despite the ‘Loonie’ struggling at the start of the year as oil fell to $30 a barrel.
The Canadian Dollar may advance even further against Sterling next year when OPEC begins to cut oil production in an effort to ease the global surplus and drive up crude prices. However as the cuts are planned to take place over the span of six months and OPEC members are notorious for not following through with cuts, it could be some time before there is any meaningful impact on oil prices.
Sterling tumbled against the Australian Dollar (AUD) this year following the UK’s vote to split from the EU, although Trump’s victory began to weigh on the ‘Aussie’ in November as he threatened to rip up a number of free trade agreements.
Should Trump follow through with his plan to throw out a number of free trade agreements then it highly likely to have a negative impact on AUD, especially if Australia’s largest trading partner, China, begins to see a slow down in growth – as some predict.
New Zealand Dollar
The Pound New Zealand Dollar (NZD) exchange rate also nosedived in 2016, reaching a new all-time low at one point as ‘Brexit’ jitter’s weighed on Sterling.
The ‘Kiwi’ faces a similar dilemma as the ‘Aussie’ next year however as the commodity based NZD is likely to suffer if markets become increasingly risk adverse as trade prices are threatened by Trump and a slowing Chinese economy.