The British pound is set to fall by as much as 15% by the end of 2017 according to Guy Petcho of Voya Investment Management.
Petcho, who formerly was a part of George Soros’ investing team, said in an interview with Reuters on Friday that a turn for the worse in UK economic growth will prevent the Bank of England from raising interest rates, which will markedly reduce sterling’s attractiveness.
Petcho’s prediction will surely add to the disappointment experienced by holders of British currency last week after its valuation fell back below $1.30 against USD – a rate which the currency has wrestled with since May – and when it fell in the last few hours of Friday’s session to a fresh eight-month low against the euro of €1.1113. Weakness in the pound followed Tuesday’s UK inflation data which came in below market expectations (2.6% for the year ending June, versus an expected 2.9%).
Should Petcho’s prediction prove correct, GBP/USD will fall from Friday’s closing rate of $1.2993 into the $1.10s, and while GBP/EUR will also fall, in percentage terms Petcho believes it will fall by only half as much as GBP/USD since the euro is also likely to depreciate against the dollar in the coming months.
Readers who wish to position themselves ahead of future weakness in the British pound, or the euro for that matter, should consider bringing forward plans for changing currency or for making international payments.
Consider, for example, that with today’s best value FX provider (TorFX), a payment of $20,000 will cost only £15,591 (a saving of £650 on today’s bank average), but at year-end, at a GBP/USD exchange rate of $1.10, the same payment will cost £18,181. So get your business done now before it costs you!
Rate Hikes Not Imminent in Australia
In other news, on Friday the RBA’s deputy governor, Guy Debelle, cooled the fire lighting up the Australian dollar in recent weeks when he told business leaders in Adelaide that “no significance should be read into the fact that the neutral rate was discussed” at the RBA’s last meeting. To add context, Debelle added that “[during] most RBA meetings, the board allocates some time to discussing a policy-relevant issue in more detail, and on this occasion it was the neutral rate.”
The Aussie had flown following the release on Tuesday of the minutes from the RBA’s July 4th meeting in which it emerged that, in the bank’s opinion, Australian interest rates will need to rise to 3.5% in order to achieve a “neutral” level should the economy continue its recovery.
With the cash rate currently at 1.5%, this was sufficient to push AUD/USD to a two-year high of $0.7987 by Thursday morning – a rally of 2.5% from pre-minutes levels. Against the New Zealand dollar, the Aussie also rose to an eleven-week high on Thursday of N$1.0845, and against the yen, Singapore dollar and euro, it rose to nineteen-month, five-month and three-month highs respectively of ¥89.32, S$1.0929 and €0.6936.
Debelle’s comments worked to force a reversal in AUD on Friday, with the currency falling between 1% and 2.2% from the aforementioned rates. Of special note was Friday’s fall in AUD/NZD from Thursday’s closing exchange rate of $N1.0753 to $N1.0611, which marked the Aussie’s worst one-day performance against its New Zealand counterpart in more than a year.
Australia’s currency nonetheless remains at high levels by recent standards, particularly against the US dollar, yen and Singapore dollar, and now is as good a time as any for those in Australia to get their hands on foreign currency for travelling or to make foreign currency transfers.
Currency rates were extremely volatile last week as the coronavirus situation worsened day by day with various countries implementing ever-tougher measures to stop the spread of the disease.
Last update: 23 Mar, 2020
This week the US Dollar was touching three-year highs when valued against a basket of major currencies. The greenback’s traditional role as one of the safe-haven currencies is helped by a domestic economy that is largely immune to the threats of the coronavirus.
Last update: 22 Feb, 2020
The strong start to the year for “risk-on” currencies is already a distant memory.
Posted: 3 Feb, 2020