As we often say at FXcompared Magazine, the only sure thing in the FX markets is that nothing is a sure thing. The whole of 2017 has found us with such unexpected currency performances, that sometimes it is hard to believe the numbers in front of us.
Euro Suffers From Uncertainty
Uncertainty seems to be the global theme of 2017, with rearrangements of global structures being navigated by many of the world super powers. Greece and Italy, both members of the European Union and users of the euro are both facing economic crisis. Some investors believe that both of these countries may pull out of using the euro and switch back to their own currency, which is negatively affecting the value of the euro. Though the euro has been extremely volatile as of late, it has not had a major dip such as that of the pound after Brexit.
Some economic experts believe that the euro will recover, and refer to it as "artificially low" at this time, in other words, the experts expect to see the euro gain value again. However, other economic experts, and the Trump administration, believe the euro will eventually reach parity with the dollar, and lose even more value over 2017. These differing opinions are a great example of the uncertainty surrounding the euro, and help explain why the euro continues to have a low, but volatile, performance.
Pound and Dollar Slightly Lifted This Week
This week, both the pound and the dollar received a slight lift thanks to different moves by the new administrations in the United States and the United Kingdom. The British pound was helped by the signing of Article 50 through the House of Commons. This signing helped alleviate some of the uncertainty surrounding the future of the United Kingdom after it leaves the European Union, and gave investors faith in the transition. Like the Euro's lackluster performance of late, much of the pound's value is influenced by an uncertain future in the United Kingdom as they enter Brexit. The signing of Article 50 shows investors that the United Kingdom has a plan for its departure from the European Union.
Similarly for the dollar, the Trump administration is making promises about revealing a favourable tax plan in the coming weeks, leading investors to continue their faith in the US dollar. While the dollar has not returned to the high it reached immediately following the election of Trump, it continues to hover at a higher value than it did before November of 2016.
Canadian Dollar and Australian Dollar Still High
Though the news in 2017 hasn't been great for the pound and the euro, both the Canadian Dollar and Australian dollar, albeit no strangers to volatility, continue to have strong performances in the FX markets. Both currencies are commodity driven, which has helped drive their strength in the market.
Much like investors are divided over the future of the euro, many investors are unsure of what to expect from both the Canadian dollar and the Australian dollar. Some believe that the Australian dollar is artificially high, while others believe the Australian dollar is undervalued still. Both agree that the Canadian dollar's value will continue to be driven by the demand for oil. As always, only time will tell what predictions investors have right.
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