The pound enjoyed a great April, hitting multi-month highs against the euro, US dollar, Canadian dollar and Aussie. This is thanks to the UK dodging a triple-dip recession.
The euro looks set to fall in May as the European Central Bank has cut interest rates to a 0.5 per cent record low while the Eurozone recession is now forecast to extend into 2014.
The US dollar could strengthen as the US created 165,000 new jobs last month, 20,000 more than forecast, while unemployment fell -0.1 per cent to 6.5 per cent.
The Australian dollar is tipped to decline this month, as the mining boom officially turns kaput, while the RBA looks set to cut interest rates to an all-time low of 2.75 per cent.
The pound enjoyed a fantastic April, reaching two-month highs against the US, Australian and Canadian dollars, and a three-month high against the euro. Why? Because, against all odds, the UK avoided a triple-dip recession, instead expanding a surprise +0.3 per cent.
Moreover, from here the pound could continue to reach fresh heights. This is because:
With the triple-dip out of the way, the outlook for the UK is far brighter. This could continue to lift the pound.
With the UK economy in growth-mode, the Bank of England is unlikely to print more money. That will send sterling higher too.
The Eurozone is in worse shape than ever with its recession now set to extend into 2014. That will make the pound stronger, considered a safe haven?
Therefore, don’t be surprised to see the pound to continue to rise in May.
The pound hit its highest point against the common currency in three months in April and, moreover, could continue to climb. This is because:
The European Central Bank cut interest rates to 0.50 per cent this month. This makes the euro less profitable and so could weaken the currency.
The UK expanded +0.3 per cent in Q1 while the Eurozone recession is deepening. This could bring the euro down too.
Therefore, whist the euro remains relatively strong against the dollar this may not continue.
The pound enjoyed strong gains against the US dollar in April, hitting its highest point since early February. However, it’s unclear if sterling will continue to gain in May. This is because:
On the one hand, the Federal Reserve said this month that it may ‘increase’ its stimulus. This could weaken the greenback, because it involves printing more money.
On the other hand, the US created 165,000 jobs in April, 20,000 more than forecast, while unemployment fell to 7.5 per cent. This could strengthen the dollar.
Therefore, the pound may have reached its peak against the US dollar for the moment!
Sterling hit its highest point against the Australian dollar in two months in April, gaining +3.44 per cent over the month. Moreover, it could continue to climb. Why? First, because the economic mood in Australia is quickly darkening, with some economists talking of a ‘protracted recession’ as the mining boom ends. Second, the Reserve Bank of Australia could soon cut interest rates to an all-time low of 2.75 per cent to support Australia’s economy.
New Zealand Dollar
Sterling stood still against the New Zealand dollar in April, gaining just +0.25 per cent across the month. However, odds are high the kiwi dollar will soon rise. Here’s why. The Reserve Bank of New Zealand is tipped to raise interest rates above 2.5 per cent next month to squelch an incipient housing boom. That will lift the kiwi dollar.
Second, New Zealand’s exports to China are booming, having risen 32.0 per cent in March compared to 12 months before. That too could lift the New Zealand buck.
The pound hit a two-month high against the Canadian dollar in April, climbing +2.01 per cent across the month. Moreover, it could continue to climb in May. First, this is because the Bank of Canada is no longer set to raise interest rates above 1.0 per cent as had been forecast. This could bring the loonie dollar down. Second, Canada’s growth outlook for 2013 has been cut -0.3 per cent to just 1.5 per cent by the IMF. This too could weaken the Canadian dollar.
The real gained +1.01 per cent against the US dollar in April. Furthermore, it could continue to gain. Why? Well, first, because the US expanded less than forecast in Q1, at just 2.5 per cent. This has weakened the greenback. Second, Brazil’s central bank has begun what some see as a cycle of interest rate rises, increasing rates +0.25 per cent to 7.5 per cent in April. This could lift the real.
Turkey’s lira climbed +0.86 per cent against the US dollar across April and looks set to continue to climb. First, this is because the US expanded -0.5 per cent less than forecast between January and March, at just 2.5 per cent. That will weaken the buck. Second, Japan’s decision to print tens of billions of yen to beat deflation means money is pouring into Turkey. That should lift the lira.
Your Free Forecast
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