Trans-Atlantic Exchange Rate Report for December 15th - 19th

By: Michael Horvath, The Quinnipiac University Global Economics Research Team

Trans-Atlantic Currencies Index

Source: Eurostat and own calculations. Exchange rates are inverted to be USD per local currency (i.e., an increase indicates a stronger domestic currency) and then indexed to be 100 at the start of the period.

From December 15^th – 19^th, the Trans-Atlantic currencies displayed similar trends in comparison to the US dollar. The Canadian dollar (red) began the week even until experiencing midweek gains, followed by a maintained end of week, ending the week up 0.26%. The Swiss franc (maroon) fluctuated both above and below the price line throughout the week, finishing at an increase of just 0.001%. The euro (blue) exhibited a depreciation from the beginning to midweek where it then appreciated until the end, concluding the week up 0.16%. The British pound (green) proved a volatile journey, hitting a midweek low of -0.42%, followed by a weeklong high of 0.28%, before once again decreasing to finishing the week up 0.08%.

Trans-Atlantic Historical Trends

Source: Eurostat and own calculations. Exchange rates are inverted to be USD per local currency (i.e., an increase indicates a stronger domestic currency. The center line is a rolling three-month average. The upper and lower boundaries are the average plus and average minus one standard deviation, respectively, for the same three-month period.

Through the week of December 15^th – 19^th, all currencies varied in their direction and magnitude. The Canadian dollar (CAD) continued increasing from previous weeks; surpassing its high from September, before experiencing subtle depreciation, now residing in between its peak and September value.  The Swiss franc (CHF) was the only currency to experience an increase, as it continued its upward trend from previous weeks, now resting above the upper bound. The euro (EUR) experienced essentially no change as it continues to remain above the upper bound. The British pound (GBP) displayed an increase that surpassed its upper bound before falling just above last week’s value.

Additional Reading

Bank of England cuts key interest rate

This article discusses the recent Bank of England interest rate cut from 4% to 3.75%. The central bank’s policymakers came to a 5-4 decision to reduce the interest rate by 0.25% after high inflation began to ease. By cutting the interest rate, borrowing becomes easier for both consumers and businesses, thus stimulating economic growth through spending, investment, and production which then leads to higher employment. The risk of an interest rate cut is an increase in inflation, which would likely lead to the central bank increasing rates later. The central bank must consider these effects when coming to a decision.