The impact Turkish economic issues are having on GBP/USD exchange rates

We have had a fairly interesting start to the trading week for Sterling exchange rates against all of the majors and most notably against the Turkish Lira.

Because of these issues we have seen the U.S Dollar gain further ground against most major currencies.

Issues in Turkey have been one of the main drivers for all major currencies this week, with the Dollar and Swiss Franc gaining more strength against the Pound and the Euro along with other ‘riskier currencies’ weakening off, making them slightly cheaper to buy.

There are a few reasons that the issues in Turkey can impact exchange rates around the world, firstly the mere fact that a fairly large economy is seemingly in a little bit of trouble does lead to investors moving their money into ‘safer havens’ such as the U.S Dollar and the Swiss Franc, this increases demand in these currencies and makes them stronger.

This can also lead to the perceived ‘riskier’ currencies losing value. Currencies such as the Australian Dollar, New Zealand Dollar and South African Rand all lost value earlier in the week as investors made their move to come out of these currencies and into the safer havens as mentioned above.

The reason the Euro lost ground is due to the exposure that many European banks have to Turkey. Should these economic problems escalate any further then there are a number of banks within the Eurozone that would find themselves with quite a headache, further news of the problems heightening in Turkey is fairly likely to lead to Euro weakness and on the flip side should the Turkish problems appear to be heading for a resolution, even if it is merely kicking the football down the road then the Euro may gain back value against the Pound.

If you have a transfer to make in the near future then it would be prudent to keep a keen eye on the issue with Turkey as it may impact the cost of your purchase. The more this problem escalates the more likely we are to see further Dollar strength, should the issue soften it may lead to the Pound gaining value back against the Dollar.

In terms of U.K economic data we have the release of key inflation data this morning and actually had fairly positive news that unemployment had dropped from 4.2% down to 4% – The lowest we have seen since 1975!

Despite this news the Pound didn’t make any major positive progress as it does appear Brexit uncertainty is still very much holding back any large increases in the value of the Pound.

We also have Retail Sales figures tomorrow along with growth estimates on Friday; couple that with Turkey and we may be in for a fairly volatile end to the trading week.

If you have a currency exchange to make in the near future and you would like my assistance then feel free to contact me on [email protected] with a description of your requirement and i will be more than happy to speak with you personally.

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