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Brexit noise sinks the pound and euro, but other currencies gain vs the dollar

The US dollar is stronger for a second day as the British pound and euro weakness helps the greenback. Canada gets confirmation that inflation is firming, giving lift to the loonie. Record high equity markets in India help the rupee while China sets the renminbi daily fix at 7 where it will likely stay for the rest of the year. 

“Every noble work is at first impossible”

Thomas Carlyle
  • FX Rates
    December 18, 2019

    Rates are not real time. Rates are today's indicative mid-market rates as of time of publishing, which may vary. Please contact SVB for a current quote.


  • USD

    The dollar strengthened in early trading mostly on pound and euro weakness. Financial markets try to distill the noise of Trump impeachment, and will be watching proceedings today. Yesterday’s strong Industrial Production figures helped the dollar and seem to confirm to the financial markets that the Fed will not be raising rates in 2020.

    GBP

    The pound has continued to weaken and has now lost 3% vs. the US dollar since the Boris Johnson election victory last week. Brexit concerns reemerged after Johnson announced no extension to the transition time frame after the January 31 exit. Positive sentiment around the S&P credit rating agency upgrading UK credit rating to stable was overshadowed by an increased chance the BOE will have to cut their overnight benchmark rate in 2020 to encourage economic growth.

    EUR

    The euro is weaker today despite German Business sentiment index (IFO) coming in stronger than expected for December. EU Brexit negotiator Michel Barnier has reportedly said that he will prioritize achieving a trade deal with the UK before the deadline; however, it will be difficult to achieve in the time frame set.

    CAD

    The Canadian dollar strengthened after November’s inflation readings confirmed the highest rate (2.2%) in 10 years. Although some of the inflation components are considered transitory, the November readings confirm the Bank of Canada will not be cutting rates anytime soon.

    ASIA/PACIFIC

    The Japanese yen gained as some FX traders moved to the sidelines as year-end gets near. Bank of Japan meets tomorrow.
    The Chinese renminbi has settled into a very tight trading range at 7 flat.  Chinese monetary authorities are expected to add liquidity to markets, just as the Fed does in the US, to keep liquidity markets functioning over year-end.

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For more analysis on FX markets or information regarding SVB's FX services:

Contact your respective SVB FX Advisor or the SVB FX Advisory Team at fxadvisors@svb.com.
See all of SVB's latest FX information and commentary at www.svb.com/foreign-exchange

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About the Author

Peter Compton is a senior foreign exchange advisor for Silicon Valley Bank’s global financial services group, and has been with SVB since 2007. He helps clients design and implement hedging strategies for foreign currency exposures. Compton has over 20 years experience in global financial markets.

Before joining Silicon Valley Bank, Compton spent seven years working in the European equity markets. Based in Germany, he spent four years with HSBC and three years as Head of Equity Sales for ABN-AMRO in Frankfurt. Prior to his work overseas, Compton spent seven years with Bank of America in San Francisco as an equity and fixed income derivative specialist.

Compton holds a bachelor's degree in business and management from the University of Rhode Island and a Master's of Business Administration from San Francisco State University.
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