The coronavirus outbreak has made the currency markets even more unpredictable than usual. Here we highlight some of the main currency pairs that will affect UK clients, both living abroad or UK based but with interests abroad.
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The first step in that is to fully understand the different financial and business challenges facing you. From there, we can create the best solutions and guidance. So do please get in contact with us.
Here are some examples of currency pairs that you may wish to watch, should you be exposed to them:
The US dollar reached an incredible 35-year high vs the pound. Many companies are looking to safeguard during the pandemic by hoarding USD. This provides individuals with the best opportunity since the 1980s to exchange them for GBP.
Despite this, the Bank of England’s second emergency cut to interest rates caused the pound to strengthen slightly and this has continued through the second part of this week. As the markets began to stabilise, the dollar weakened. The markets being so volatile at the moment it’s difficult to predict where this currency pair will move next.
Despite GBP’s well documented drop against the USD and the EUR, it managed to reach a near four-year high against the Australian dollar. Due the Australian economy’s reliance on commodity exports to China, the outbreak of COVID-19 has slowed the Chinese economy to a point where GBP/AUD reached its highest level since the EU referendum.
If you were planning on moving some GBP into AUD this year, now could well be the time to consider arranging an exchange or discuss putting a strategy in place.
The situation for the New Zealand dollar (GBP/NZD) is very similar.
Overall, over the past month the GBP/CHF rate has been broadly in line with GBP/EUR. Over the course of this week, following the Bank of England’s decision to make a second emergency cut to interest rates, the pound has strengthened against safe-haven currencies such as the US dollar and Swiss franc.
The Swiss National Bank made the decision to keep interest rates on hold recently, stressing that monetary policy alone could not fight the economic downturn presented by the coronavirus pandemic.
The euro strengthened to a 6-month high against the pound as sterling struggled with coronavirus worries. Because the UK has a larger trade deficit than, say, the Eurozone, the mechanics are such that the pound will tend to fall by more than other currencies, such as the Euro or Swiss Franc, in times of crisis.
The euro has benefitted from coronavirus related developments due to its status as a ‘funding’ currency, causing it to strengthen at times of market stress. However, as we’ve seen, this does not mean that the single currency is immune to volatility. It has suffered against the dollar and remains sensitive to talk of an impending recession.
Over the past week, however, the pound has strengthened by around 2% against the euro.
The Singapore economy experienced its first deflation since January 2010 at the beginning of this week and is expected to suffer further as Singapore shuts its borders.
The Monetary Authority of Singapore (MAS) will release its next six-monthly monetary policy statement at 8am on the 30 March, earlier than originally scheduled. Like most other currencies, the Singapore dollar is currently suffering against the US dollar due to the greenback’s safe-haven status but is stronger against the pound.
Again, GBP/SGD has broadly followed other GBP pairs, with a rally over the past week.
Earlier this month, the Hong Kong Monetary Authority (HKMA) announced a surprise 50 basis points cut of its base rate to 1.5%. Despite periodic speculation that HKD will break its peg to the US dollar, the HK Financial Secretary said that they will continue to monitor the situation and keep the peg stable.
Sterling has also strengthened against the Hong Kong dollar in recent days, recovering around half of the value it lost in the middle part of the month.
How can Smart help?
Smart Currency Exchange would like to reassure clients that we will be continuing to work normally throughout the COVID-19 crisis.
We remain fully staffed and have measures in place to ensure that we will have no interruption of service.
If Smart can offer any help to you at all in these unprecedented times.
The team at Smart Currency Exchange extend their thoughts to all of those impacted by COVID-19 and wish you good health.