Trans-Atlantic Exchange Rate Report October 20th – 24th

By: David R. Fredericks, 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 100 at the start of the period.

During the week of October 20 – 24, all four major Trans-Atlantic currencies strengthened against the U.S. dollar. The British pound (GBP) posted the largest gain—rising close to +1.0%—while the euro (EUR) advanced about +0.8% and the Swiss franc (CHF) roughly +0.6%. The Canadian dollar (CAD) initially moved higher but ended only slightly positive.

Some observers suggested that the broad move reflected improving risk sentiment and steadier European macro data, while commodity-linked currencies such as the Canadian dollar lagged amid softer crude-oil prices. Regardless of cause, the week’s outcome was one of general European currency resilience, led by the pound’s steady appreciation.

Trans-Atlantic Historical Trends

Source: Yahoo Finance and own calculations. Exchange rates are inverted to be USD per local currency. The center line represents a rolling three-month average, while the upper and lower boundaries correspond to one standard deviation above and below that average.

From mid-July through October, the four currencies have moved along distinct paths. The Canadian dollar (CAD)reached a summer peak near 0.735 USD before trending lower through August and September. The Swiss franc (CHF)appreciated across late summer and remained near multi-month highs, while the euro (EUR) maintained a narrow range between 1.16 and 1.18 USD. The British pound (GBP) was the most volatile, fluctuating between 1.33 and 1.38 USD before regaining strength in October.

According to some analysts, these patterns may reflect differences in monetary-policy outlooks and exposure to commodity markets. Regardless of interpretation, European currencies have broadly stabilized, while the Canadian dollar remains more closely tied to changes in energy prices.

Outlook

Upcoming inflation releases in the euro area and the U.K. may influence near-term exchange-rate dynamics. Some forecasters expect continued range-bound trading as markets weigh policy divergence between the Bank of England, the European Central Bank, and the Federal Reserve.