What will the New Year Bring?
Now that the Christmas Turkey has been polished off and the effects of all that brandy has begun to wear off, it’s time to start thinking about what the New Year will bring.
In the world of currency, 2020 is already shaping up to another hectic year for traders. So let’s take a look at some of the trends that will impact GBP, EUR and USD exchange rates in 2020.
What might happen in 2020?
In the UK Brexit uncertainty will continue to loom large in 2020 in spite of Boris Johnson’s new majority in parliament allowing him to break the long running deadlock over his EU Withdrawal deal.
While this has provided some short-term clarity, GBP investors are already looking towards the next stage of negotiations with some trepidation, as Johnson has only left himself with eleven months in which to negotiate the UK’s future trade relationship with the EU.
As such the threat of a no-deal Brexit will hang over Sterling throughout the year, likely limiting the upside potential in GBP.
Also on the radar of GBP investors next year will be the Bank of England (BoE), which is expected to implement a rate cut at some point in the next twelve months now that the UK’s withdrawal from the EU is sorted.
Meanwhile, the euro is likely to remain on the defensive for the foreseeable future as it remains beset by weak economic growth in the Eurozone as well as concerns about a future trade dispute with the US.
As a result, a lot will be riding on the European Central Bank (ECB) plans for monetary policy over the next year. Will new President Christine Lagarde seek to prop up the bloc with more stimulus or will she hope that Eurozone leaders will finally answer the bank’s calls for fiscal support?
Finally we have the US dollar, which is likely to continue to be influenced by US-China trade headlines at the start of the year.
However with a deal reportedly all but signed off, the focus for USD investors may quickly turn to US politics as the country gears up for the 2020 presidential elections.
We won’t know who will be the 2020 Democratic candidate for a few more months, but the potential for Trump to be challenged by a Democrat who is viewed as economically disruptive, such as Bernie Sanders could prove USD negative next year.
With so many key events on the calendar, 2020 looks to be shaping up to be even more volatile for currency markets than 2019.
We’re here to talk currency whenever you need us, so get in touch if you want to know more about the latest news or how it could impact your currency transfers.
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