If foreign exchange markets continue the past nine months’ trends into the end of the year, 2017 will be remembered as a terrible one for the US dollar and a fantastic one for the Euro.

However, with early signs that current trends could be reversing, will the fourth quarter of 2017 turn FX markets on their heads? This report reviews the most popular currency pairs in the UK and analyses where they could be heading next.

Central bankers play their hands

If 2016 was the year of politicians, 2017 has seen central bankers claim back their throne as FX kings.

While the Federal Reserve has been raising interest rates since 2015, the European Central Bank (ECB) and Bank of England (BoE) have lagged behind their North Atlantic peers in normalising monetary policy. Until now.

European central bankers have become increasingly hawkish in the latter half of 2017, which saw the US dollar fall to a 33-month low in September, while the Euro ascended to a 33-month high against USD.

Now, the Bank of England is also expected to get involved, with bond prices suggesting a greater than 80% chance that policymakers will raise interest rates for the first time since the 2007-8 financial crisis, reversing last year’s post-Brexit 0.25pt cut.

However, that does not mean all hope is lost for greenback traders. With Janet Yellen’s term ending in early 2018, and the current head of the Federal Reserve not in President Trump’s favoured books, the hunt is on for a new Chair. Could a more hawkish candidate, such as current Fed Governor Jerome Powell or Stanford academic John Taylor, revive traders’ appetite for the US dollar?

Six months on, has Brexit stalled?

The triggering of Article 50 in March began the 2-year negotiating process for Brexit, by the end of which Britain will leave the EU. With or without a deal.

Since March, the various connotations of a good trade deal, a bad trade deal and even no deal have been discussed and debated fervently, but it wasn’t until negotiations began in mid-June that the potential tone of the talks became clearer.

While beginning in a friendly and productive tone, the negotiations have since become more centred on potential hold ups due to lack of concessions. Will the deadlock be broken in Q4 to help both sides progress into more meaningful discussion points?

Tax cuts, job offers and WWIII

As with all situations in the Trump era, nothing is inevitable until it has happened. However, the third quarter saw things take a turn for the apocalyptic.

US-North Korean tensions were ramped up in the third quarter, with the threat of nuclear war climbing to its highest in recent memory.

Thankfully, however, the Trump administration have also been working diligently to enact a round of tax cuts, a key campaign trail pledge from the President.

Speaker Paul Ryan believes that a Republican tax reform plan could be approved before the end of 2017. With that said, however will party divisions within the House strike again, thwarting the President of his first Congressional victory?

Over the page, we analyse the top three currency pairings traded by Accendo Markets’ clients.