ACM Update Monday 24th September 2018

Like the Chas & Dave songs Theresa May is finding there “Ain’t no pleasing you” when it comes to the EU and the British public. Should we take the title of another song “mustn’t grumble” into the final leg of the negotiations with the EU or will that lead to the inevitable crash bang and 2001 release “wallop” on the final deal and outcome? The meeting in Salzburg was meant to provide clarity. It didn’t.

Sterling is going to move considerably in either direction in Q4’18. Sterling was making some solid upside moves against EUR with it climbing to just below 1.13 at one point. Those with ‘take profit’ orders in the 1.12’s had orders filled and took advantage of the spikes in the market. The direction and sentiment for Sterling/Euro has since shifted to the downside.

You can view the movements on Sterling/Euro on the graph below –

GBP/EUR - 1 Week


The move is largely driven through EUR/USD as it has pushed up into the high 1.17s thus pushing GBP/EUR lower. Of course, some negative sentiment around Brexit has exacerbated the move lower for Sterling. EUR/USD advanced again this morning on the back of the German IFO figure that came in at 103.7, slightly above expectations. Other data out of the EU this week is in the form of inflation data that is released on Friday. If you have a requirement to sell EUR back into Sterling do consider implementing ‘take profit orders’ to the downside. Please contact the trading department to discuss technical levels that are achievable to execute at. This week we have a light data calendar out of the Eurozone and the UK so any significant price movements on GBP/EUR are likely to come from ‘Brexit’ headlines and noise. We do have the ECB president, Mario Draghi, speaking on Thursday so this will likely move the EUR in a positive or negative direction dependent on his commentary.



Sterling/Dollar

Cable (GBP/USD) suffered a sharp decline on Friday falling from the high 1.32s into the 1.30’s. This was after the UK Prime Minister, Theresa May, said that negotiations with the EU are at an ‘impasse’. That put hopes for a positive outcome and favourable deal between the UK and EU further away than ever. However, Sterling has made a small recovery this morning on comments from the UK Brexit Secretary, Dominic Raab, that apparently the Government remains confident on a deal. What’s the phrase, “a week is a long time in Politics”. A weekend now seems like a lifetime if we can go from a significant Sterling fall to a positive outlook on the Monday morning. Expect these moves on Sterling for the next 3 months. The ‘he said she said trade”. There’s largely no real substance behind these soundbites although the market will move on them short-term in any case.

You can view the movements on Sterling/Dollar on the graph below -

GBP/USD - 1 Week

Hopefully this week we get some respite from Brexit noise. The US is likely to be more in focus this week. Will the dollar come under further pressure as it did for the majority of last week around talk of tariffs and trade wars? We have the Federal Reserve meeting this week and that comes with the interest rate decision. Will we see another interest rate increase of 25bps from the Fed Chairman, Jerome Powell? The market has largely priced this in already so expect a modest uptick in the US Dollar this week. Other than the Federal Reserve meeting we have US GDP Annualised (Q2) released that is expected to print 4.2%.

Rounding off the week from a UK perspective we have the Bank of England Governor, Mark Carney, speaking on Thursday. Questions will inevitably be skewed to Brexit rather than focusing solely on the UK economy so this may impact Sterling dependent if Carney engages on those questions or focuses solely on the economics. On Friday we have GDP (QoQ) (Q2) out from the UK that is expected to print 0.4%. Any figure lower than this then Sterling could have a wobble to the downside.

If you have any questions please get in touch directly.

Have a fantastic week.

Written by Liam Alexander.

ACM Update Monday 17th September 2018

The EU summit gets underway this week with the first one being held on Thursday where ‘Brexit’ will be on the menu. Some reports suggest a deal is close, some say we’re about as far away as a reality tv ‘star’ is to winning the Nobel Prize.

Sterling has recovered some fighting spirt over the past few trading sessions and is shrugging off the UK Prime Minister’s ‘it’s my way or the highway’ line on the deal to be put forward to the EU. Time will tell if this tactic is correct or we stumble out without a deal. Dependent on the EU stance this week, Sterling may be due another upside move.

Sterling has rallied against the Dollar and has pushed through 1.31 the figure. This is the highest it has been in 6 weeks.

You can view the movements on the graph below –

GBP/USD - 1 Week

If you have a requirement to purchase USD from GBP I would consider locking in some on a SPOT basis. Please contact the trading department for a rate of exchange.

In addition, with Q4 just around the corner and Q1’19 likely to prove extremely volatile for Sterling do consider discussing Forward Contract’s and the margin required to mitigate your risk. Feel free to contact me directly on this.


From the UK this week, other than political pillow fights, we have inflation data out in the form CPI (YoY) and Core CPI (YoY) August. Expectations are for a print of 2.4% and 1.8% respectively. We also have Retail Sales ((YoY) and (MoM) Aug out of the UK. Expectations on the monthly release are for a print of -0.2%. Sterling may have a slight wobble around the release of this figure. We also have the Bank of England Quarterly Bulletin out on Friday rounding off the data for this week from a UK perspective. Should there be any soundbites picked up on in relation to Brexit expectations then Sterling may move on the back of it.

Sterling/Euro

This pair may have some volatility in it this week with the ECB President, Mario Draghi, speaking on a couple of occasions. Add in the EU summit and the potential for various remarks to move either Sterling or Euro then we could see GBP/EUR break through 1.13 the figure or shift back below 1.12. Sterling/Euro has traded under 1.11 in August so if you have a requirement to purchase EUR from Sterling I would consider locking in some on a SPOT basis and then implement a market order at 1.13 should Sterling have a rally this week.

You can view the movements on Sterling/Euro on the graph below –

GBP/EUR - 1 Week

If you have a requirement to sell EUR/GBP I would think about implementing some market orders to the downside to take advantage of any moves in this direction. However, as I’m sure you’re bored of me saying, doing nothing is speculating. EUR/GBP is still at a good level historically and should you have a requirement to purchase Sterling consider giving yourself a price point to work from by executing some on a SPOT basis at present to mitigate any risk should EUR weaken.

If you have any questions on your individual requirements please feel free to get in touch directly.

Have a fantastic week.

Written by Liam Alexander

ACM Update Monday 3rd September 2018

Last week there was a positive feeling on a ‘good’ deal on Brexit. Now there isn’t. Sterling was rising like a salmon in the River Tweed. Now it isn’t. What will this week have in store for us?

You can view the recent price movements on Sterling/Euro on the graph below – 

GBP/EUR - 1 Week

INSERT GBP/EUR GRAPH

The summer is drawing to a close and the UK Parliament is back in session from tomorrow. With an informal date of October (although this could now be pushed to November) for an agreement on the Brexit divorce deal between the UK and EU we should see ‘Brexit’ negotiations increase in intensity. At present, we still look miles apart on a framework with specific actions that will suit both sides. Could it possibly be an 11th hour cobbled together agreement in March? There is still that possibility. There is still the possibility of a ‘No deal’. Should we have badly arranged deal or a ‘No deal’ then like a 59.8% cask strength whisky, it’s going to pack one hell of a punch to Sterling. 

To this end, please start to consider your Q4’18  and Q1’19 position. Please get in touch with me directly to discuss rates and margin requirements for Forward contracts on a 3/6/9 month basis. 

Sterling is currently trading on headlines and comments from various officials involved in the negotiations. However, we have had poor manufacturing data out this morning with a print in the (Aug) PMI’s of 52.8 against expectations of 53.8.

Could we see a further erosion in Sterling in the coming months? Absolutely. However, if you are selling EUR/GBP I would look to take advantage of the recent downside movements. We had largely been trading in a range of 1.11 to the downside with a toppish level of around 1.14. We have now broken through 1.11 and we may fall further. Please consider locking in some of these gains. Feel free to contact the trading department for a rate of exchange.

Sterling/Dollar

Please view the recent movements on Cable (GBP/USD) on the graph below – 

GBP/USD - 1 Week

Is Sterling undervalued or overvalued at present? History would tell us it’s undervalued. Whilst history plays a part in shaping the future, there is no blueprint for Brexit. Therefore, how do you accurately value Sterling in the present? Largely, a lot of the downside move on GBP/USD has been driven through US Dollar strength. Might Sterling over the next few months prove more of a driver? The longer uncertainty continues around the details on any Brexit deal then I think Sterling is going to come under further and increased pressure. Might these be significant moves? I think we’ll be looking at percentage points on these moves.

If you have a requirement to purchase USD from GBP I would consider locking in some on a SPOT basis at present. Do also consider locking in a portion of your exposure on a Forward Contract to de-risk your position. I think Sterling still has room to fall further. This week we have inflation report hearings out of the UK and the NFP figure (Non-Farm payrolls) that are the main releases in a relatively quiet data week.

Selling US Dollars? If you can achieve under 1.30 the figure lock in a sizeable portion at these levels on a SPOT basis. This will average up your annual FX rate significantly. I would then discuss with our trading department staggering ‘take profit orders’ at various levels to the downside. Please discuss appropriate technical levels to aim for this week and over the coming months.

Have a fantastic week and should you have any questions please get in touch with me directly.

Written by Liam Alexander

ACM Update Monday 13th August 2018

The Premiership football season is upon us again. No doubt all the teams will crumble to Manchester City like the Turkish Lira did against, well, every currency last week. Will the Lira rally this week? It has fallen so far that if it doesn’t rally then the word ‘contagion’ will be back in the headlines. That will only exacerbate the impending debt burden and issues for Turkey.

EUR/USD has fallen to 13 month lows at 1.1360 although has since recovered slightly to test the 1.14 handle. The Euro has taken a hit on the back of the Lira devaluation with contagion fears due to a number of European Banks having exposure to Turkey. EUR/USD has also been further weighed upon with investor outflows from EM (Emerging Market) currencies into safe haven currencies like CHF/JPY/USD. The US President, Donald Trump, also added to Turkey’s problems with a doubling of tariffs on Turkish Steel and Aluminium in a continuation of the political spat over the detainment of the American citizen Andrew Brunson.

You can view the recent downside movements on EUR/USD on the graph below –

EUR/USD - 1 Week

If you are holding any US Dollars and need to convert into Euro’s please take advantage of the recent price movements. If you can trade anywhere under 1.15 the figure then I would consider locking in a significant amount of your exposure at current levels. Please feel free to contact me directly to discuss a strategy and the trading department to execute your transactions.

Sterling/Dollar

Sterling is going to be under pressure short-term. The political ‘elite’ don’t seem able to run a bath never mind a country at present. Political risk is going to be a negative for the pound. Potential leadership battles, backbencher revolt, and the small matter of a ‘No deal’ Brexit is going to keep the compass pointing south for GBP. If you have a requirement to sell Dollars back to Sterling I would firstly take advantage of the current rates with a SPOT transaction. Please contact the trading department for a rate to execute at. Once you have covered off a SPOT transaction I would consider staggering market orders to the downside at 1.2750/1.27/1.2650. This will allow you to average up your FX rate should we hit these levels.

There has been talk of Cable (GBP/USD) falling to lows last seen in 1985 should we have a ‘No deal’ or a very poor deal on our exit from the EU. Whilst of course this is a possibility that is still 8 months away. On a 10 year basis, you are still massively in favour on a USD/GBP trade so take advantage at current levels.

If you are on the other side of the trade and need to move Sterling into USD then you are looking for some intraday spikes and some short-term recoveries. Unfortunately, I expect these to be few and far between at present. Look at some orders around 1.28 the figure although I would caveat that the potential for further downside movements are high. Look to protect your position by covering some of your exposure on a SPOT basis and the implementation of a Stop Loss. Please contact the trading department to discuss your individual requirements in more depth.

You can view the recent movements on GBP/USD on the graph below –

GBP/USD - 1 Week

Last week was relatively data light although the geopolitical element in Turkey moved markets. This week we have some data releases out of the Eurozone and the UK that will be keenly watched and should impact GBP/EUR.

Sterling/Euro

Sterling traded under 1.11 last week against the Euro. This looked like a one way bet until the Turkish situation unfolded and weakened the Euro giving the pair some respite. We are currently trading at 1.12. We will likely move sideways today with nothing of note out. However, I expect the downtrend to resume dependent on figures printed this week. We have GDP (QoQ) (Q2) Preliminary out of Germany tomorrow and GDP (QoQ) and (YoY) (Q2) Preliminary released for the Eurozone. The German GDP figure is expected to print 2.5% against a previous of 1.6%. This should give the Euro a short-term boost driving EUR/GBP lower. On the UK side we have the release of Average earnings (3M) (Jun). On Wednesday we have inflation data out of the UK in the form of CPI (Consumer Price Index) readings and also the Inflation report hearings. This should impact on Sterling. Friday we have some inflation data out of the Eurozone to round off the week.

If you can achieve under 1.12 to sell EUR to GBP I would take advantage of this. Please consider implementing a market order at 1.12 the figure by contacting the trading department. If you have a requirement to purchase EUR from GBP then you may have some upside potential with Turkey’s issues set to continue for the immediate future in any case.

You can view the recent price movements on GBP/EUR on the graph below –

GBP/EUR - 1 Week

If you have any questions please get in touch with me directly as the FX landscape is going to shift considerably this year one way or the other.

Have a fantastic week.

Written by Liam Alexander

ACM Update Monday 6th August 2018

Is it time to put away the sun hats and dig out the tin hats? Cable (Sterling/Dollar) has hit 11 month lows today on the back of increasing concerns on a ‘No deal’ Brexit.

Sterling/Dollar

Last week we had the long awaited interest rate decision from the Bank of England.  Market expectations were for a rise of 25 bps to 0.75% and it duly arrived. The only slight surprise was that the vote was unanimous. You would think with rates being next to static for the best part of a decade that there would have been more of a lift for Sterling.  After a brief jump above 1.31 the pair was back on the defensive. We moved below the 1.30 handle and since then the downside move has continued.

You can view the movements on Sterling/Dollar on the graph below

GBP/USD - 1 Week

Like the changing of the seasons, focus has now returned to ‘Brexit’. Should there be a ‘No deal’ then expectations are for Sterling to weaken by a similar amount to the night of the referendum. That could conceivably see Sterling/Dollar significantly below the 1.20 level. If you have a requirement to purchase USD from GBP over the next 6-9 months it may be prudent to consider a Forward Contract to de-risk your position. Please contact the trading department to discuss rates and margin requirements.

If you’re holding Dollars consider implementing a series of market orders to take advantage of potential further downside risk to Sterling. I would caveat though that to sell Dollars into Sterling at present is the best its been in almost a year. Consider covering off some on SPOT and then work in some market orders. Please contact the trading department to discuss technical levels and realistic levels to achieve in your timeframe.

This week there is little data of note out from the UK other than preliminary GDP (YoY) and (QoQ) (Q2). I wouldn’t expect any great showing on these numbers so Sterling is likely to remain flat if not come off further.

Sterling/Euro

We have moved under the 1.12 level on GBP/EUR. 

You can view the movements on the graph below –

GBP/EUR - 1 Week

INSERT GBP/EUR GRAPH

The dollar is in the ascendency and has pushed EUR/USD down to the mid-1.15s so the Euro is under pressure too hence the move on Sterling/Euro being less severe than through Sterling/Dollar. GBP/EUR has been fairly range bound for a number of months. If you are holding Euro’s I would suggest covering off some into GBP as we’re approaching the low of the range. Please contact the trading department for a rate of exchange.

Politics and Brexit are likely to be the main drivers over the summer months for Sterling so any commentary from officials will impact Sterling. Please make sure you have discussed a strategy with our trading team to mitigate your risk over the next few months,

If you have any questions please get in touch with me directly.

Have a fantastic week

Written by Liam Alexander

ACM Update Monday 16th July 2018

The World Cup is over for another four years. Wimbledon is over for another year. Unfortunately Love Island continues to insult and decimate the IQ level of normally sane UK viewers. When does the pain end? Who knows.

The whole Brexit process is on a par with the pain and suffering that Love Island ‘entertains’ us with. It seems we are on for a ‘soft Brexit’ now. This should aid Sterling, in theory. However, today we have the most recent Brexit strategy under scrutiny in Parliament. If there any changes to the proposal? Well, it weakens the UK’s positioning power further with the EU. Should Theresa May’s proposal be voted for then Sterling should rally. 

Sterling is fairly range bound to kick off with this week as there’s no data of note out the UK today other than the vote in Parliament. 

You can view the movements over the past week on Sterling/Euro on the graph below – 

GDP/EUR - 1 Week

Sterling/Euro has been trading in a range of 1.11 – 1.14 for what seems longer than the last time Scotland reached a major football tournament (1998 for those of you that may be intrigued). If you are purchasing Euro’s from Sterling take advantage of the recent ‘spike’ in GBP/EUR. I use the term ‘spike’ tentatively. We were nestled in the mid 1.1250’s for part of last week. I would suggest utilising market orders at 1.13/1.1350. This is a realistic level to aim for. Please contact a member of the trading department to implement an order. This week data wise out of the Eurozone we have inflation data out on Wednesday in the form of CPI (Consumer Price Index) (YoY) (Jun). Other than that, this week is extremely light out of Europe. Any price movements on GBP/EUR will be likely dictated by Brexit related headlines in either the UK or Eurozone.

Sterling/Dollar

We had Retail Sales data out of the US today that were mixed. Other than the alpha male meeting of Trump/Putin there is little to report on. The Sterling focus this week will be centred around Bank of England Governor Mark Carney’s speech on Tuesday and Average Earnings out of the UK. We also have the ILO (Unemployment Rate) (3M) (May) released.  Expectations are for a print of 4.2%. We also have inflation data from the UK out on Wednesday in the form of Consumer Price Index (CPI) (YoY) (Jun). Consensus print is for 2.6%. There will be volatility surrounding Sterling on this release so please get in touch with the trading department if you have any Cable (GBP/USD) requirements.

Sterling/Dollar has been trading between mid-1.30s and just under 1.3350 over the past month. 

You can view the movements on Sterling/Dollar on the graph below –

GBP/USD - 1 Week

INSERT GBP/USD GRAPH

We’re currently towards the higher end of this range. If you have a requirement to purchase Dollars please consider locking in some of your exposure on a SPOT basis. Consider placing a market order towards 1.3350 as dependent on how Sterling performs and the market perceives the dollar and ongoing trade war concerns there may be an opportunity. However, I would add, that I don’t see Sterling/Dollar pushing too much higher over the summer.

If you need to sell Dollars back to GBP consider taking advantage of current rates.  The low on a 12 month basis is around 1.28. Might we push a few percentage points lower? Perhaps. However, if you’re holding any Dollars I would seriously consider locking in a significant amount on a SPOT basis or alternatively a Forward Contract out for 3, 6 or 12 months. This provides you with protection and peace of mind short/medium and long term irrespective how the Brexit negotiations go. Please contact the trading department to discuss your individual requirements.

If you have any questions or would like to schedule a call please get in touch directly.

Have a fantastic week.

Written by Liam Alexander

ACM Update Monday 9th July 2018

Is it coming home? It’s coming home. It’s coming home. No, not the World Cup. A ‘soft’ Brexit. Potentially. Maybe. Maybe not. Let’s go with the debut album from those Manchester rascals Oasis and say ‘Definitely Maybe’. 

David Davis, the UK’s Brexit minister, resigned. Sterling initially came off on the news although is now up 0.4% on Cable (GBP/USD) due to Theresa May’s position being strengthened, for now. This of course could dramatically change in the coming hours. Where do we go now? Is Sterling due a rally higher or will it come crashing down to earth? 

You can view the recent movements on Cable (Sterling/Dollar) and GBP/EUR on the graphs below   

GBP/USD - 1 Week

GBP/EUR - 1 Week

Most would have thought Sterling would have plummeted on the news. Quite the reverse. Sterling is up to almost the highest level in a month against the US Dollar. Granted, this is largely down to the Dollar being hammered like Panama routinely does at football. President Trump and the trade war rhetoric is weighing on USD. This can be viewed through EUR/USD pushing higher too. From a Sterling perspective, most market participants are pricing in an August interest rate rise to 0.75% so this is giving GBP a solid base to work from. 

Indeed, Sterling/Euro has pushed back above 1.13 the figure in recent trade. 1.14 has been toppish over the last few months. If you have a EUR requirement from GBP it may be worthwhile implementing a market order at 1.1350 and then 1.14 to execute on a SPOT basis. Please contact the trading department to discuss.    

If you hold EUR and need to move back into GBP I would consider locking in a sizeable portion of your exposure at current levels. Yes, it might go lower although if you can trade under 1.15 I consider this a good level to take advantage of. Please contact the trading department for a rate of exchange.

FX markets have been fairly range bound over the past week with limited price movements. Is this set to change? Politics rather than any economic fundamentals will be the main driver for Sterling in the coming weeks although as much of the world does now, Sterling will play second fiddle to what the Dollar does and that is largely determined by the man in the White House and the ongoing trade war. 

This week we have the ECB President, Mario Draghi, speaking. From the UK we have GDP (MoM) (May) released and the Bank of England Governor, Mark Carney speaking. Any further clues around interest rates will likely impact the short-term direction of Sterling. These speeches and releases largely round up the main events of this week on the economic calendar. 

If you would like to discuss your individual requirements with me please get in touch directly.

I have a funny feeling we will be paying more attention to the travails of the UK Government this week than anything else. Apart from the football.

Have a fantastic week

Written by Liam Alexander

 

ACM Update Monday June 25th 2018

As painful as this is to write as a Scot, England thrash Panama at The World Cup, beat the Springboks at Rugby and the Aussies at Cricket, Lewis Hamilton wins the Grand Prix and ‘Brexit’ is now largely irrelevant. Also, it’s going to be 30 degrees in London this week so the Hawaiian tropics will be out.

Will the sun be shining on Sterling this week or will the USD and EUR lay siege to it like rampaging Love Island watching ‘yoofs’ in Falaraki for their summer holidays? Time will tell. 

Sterling/US Dollar

Is August going to be the month when the UK raises interest rates by 25 bps to 0.75%? At the last meeting the MPC (Monetary Policy Committee) was split 6-3. We will need the economy to tick up and with Government borrowing figures looking healthier we may finally be on for a further rate rise. However, growth figures have been as lacklustre as the Panama team were at defending yesterday although we should see a gradual improvement in these numbers. 

Cable (Sterling/Dollar) has been trading in the region of 1.31-1.33 in recent trade. 

You can view the movements on the graph below – 

GBP/USD - 1 Week

This week we have Mark Carney, The Bank of England Governor, speaking on Wednesday followed by the financial stability report. Thursday we have GDP figures out of the US.

Where is Sterling/Dollar likely to go? With weekend Brexit related headlines far from positive for the UK Sterling is likely to come under some selling pressure. If you have a requirement to sell USD and purchase GBP I would consider locking in some of exposure on a SPOT basis. We can then look to implement some market orders to take advantage of any further upside. Please contact the trading department to discuss technical levels. 

Purchasing USD from GBP? I would suggest having a call with our trading department. I expect Sterling to push higher towards the end of the summer months although for now the Pound will remain on the backfoot. We touched 1.31 although we’ve since had a reversal back towards the mid 1.32’s. It may be prudent to take some risk off the table at current levels and cover some on a SPOT basis. 

Sterling/Euro

Friday we have inflation data out of the Eurozone in the form of CPI (YoY) (Jun). Other than that it is a relatively light data week for the EUR. 

GBP/EUR has largely traded in a range from 1.13-1.1450 with 1.1450 being toppish after the move higher after the Bank of England. If you are looking to purchase EUR from GBP I would consider implementing a market order at 1.14 for a portion of your exposure whilst considering the 1.13 level as a floor. If you can achieve over 1.13 on SPOT I consider this a good level in the current climate. Please contact the trading department to discuss your individual requirements. 

If you are selling EUR to purchase Sterling take advantage of current levels. Historically, anything under 1.15 has been considered great value. Look at covering off a Forward Contract out for 6 months till end of year to mitigate your currency risk. Q1 next year/March/Brexit? Currency rates quite frankly could be anywhere dependent on how negotiations go. 

You can view the movements on Sterling/Euro on the graph below for last week – 

GBP/EUR - 1 Week

INSERT GBP/EUR GRAPH

If you have any questions please do let me know.

Have a fantastic week

Written by Liam Alexander

 

ACM Update Monday June 11th 2018

Wonders will never cease. An American President will sit down with a North Korean leader in Singapore on Tuesday. More surreal is the fact that Scotland beat England at cricket. Who knew Scotland had a cricket team! Did you know that the former Rangers, Manchester United and Scotland Goalkeeper Andy Goram is the only person to play in an international cricket match and an international football match. There we go readers (for those of you that are left after GDPR), you learn something every day!

The G7 Summit went well. Then it didn’t. Expect trade and tariff tensions to continue between President Trump and the G7 members and pretty much every other country for the foreseeable future. I doubt Justin Trudeau will be invited over to the White House for a BBQ this summer.

Turning our attention back to the UK, Sterling is under pressure. We had disappointing data out in the form of industrial and manufacturing production this morning in addition to the trade surplus widening. Cable (GBP/USD) has now retraced the recovery it made last week back below the 1.34 handle. We have a busy week on the data front with the ILO Unemployment rate (3M) (Apr) and average earnings out tomorrow. We also have inflation data out on Wednesday in the form of CPI (Consumer Price Index). I would expect us to show a slight uptick in inflation to 2.5% although most estimates are for a print of 2.4%. The weak pound has culminated in a drop in inflation this year although with oil prices heading higher there may be more of a conversation around the Bank of England raising interest rates in August. This may give Sterling a shot in the arm towards the end of the summer months. For now, I expect Sterling to remain on the backfoot. 

You can view recent price movements on Sterling/Dollar below – 

GBP/USD - 1 Week

If you hold USD consider converting some of these holdings back to Sterling on a SPOT basis or lock in some more on a Forward Contract. Do I expect GBP/USD to remain at these levels long-term? No. We will see Sterling/Dollar push higher with a test of 1.40 again at some point. If you look at things on a 10 year basis the average GBP/USD rate is a little over 1.52. Take advantage of the recent moves and lock in some Sterling. Please contact a member of the trading department for a rate of exchange. 

If you are a USD buyer from Sterling we have a raft of Dollar related activity this week in addition to the UK focused data. We have inflation data out of the US tomorrow followed by the Federal Reserve meeting on Wednesday. It is expected that interest rates will be raised by 25 bps to 2% from the current 1.75%. This will have been priced in by the market although the act of raising rates and any communication on future projections and the pace of future rises should be dollar supportive. If you need to purchase Dollars this week consider doing so prior to Wednesday on a SPOT basis. Feel free to contact me directly should you wish to discuss your individual requirements. 

Sterling/Euro

We have been trading in a tight range for what seems like an eternity. An asthmatic sloth moves more. However, the UK and ECB are likely to be more of a focus this week so we should see some movements. We have the ECB interest rate decision and policy statement and press conference this week. Whilst rates will be left on hold expect QE (Quantitative easing) and the potential end of the ECB’s bond-buying program to be discussed. The purchase of bonds will be phased out although will the end date be set at this meeting or in July? Should the ECB president Mario Draghi decide to wind down Bonds then it’s a signal to the market that the Eurozone is finally out of crisis. There is still a huge divergence between the ECB and the Federal Reserve which is reflected in the current EUR/USD rate. This move by Draghi may give the Euro a boost and drag it back above 1.20 the figure. What will this do to Sterling/Euro? It may push GBP/EUR slightly lower short-term. If you hold Euro’s and need to convert to Sterling please contact the trading department and discuss implementing a market order to take advantage of any intra-day movements in your favour. 

You can view the recent price movements on Sterling/Euro on the graph below – 

GBP/EUR - 1 Week

If you need to convert Sterling into Euro I would consider 1.14 the figure a target to lock in at. Yes, it isn’t great. However, in the current market this is looking mid to toppish at present. Give yourself a realistic price to work from and over the summer months we can look at averaging this up for you.

The FX landscape is open to rapid change due to how politics and economic policy are largely played out these days. Please make sure you have discussed a strategy with us to limit your downside risk whilst allowing yourself room to take advantage of any opportunities to the upside.

If you have any questions please let me know.

Have a fantastic week.

Written by Liam Alexander

ACM Update Wednesday 30th May 2018

Please allow me to open this week’s update by thanking you for still being here with us, for agreeing to continue to receive our musings and commentary on the currency markets. It struck me how relevant “Mama Mia”, Abba’s famous song is so relevant now in this time of Italian and Spanish tempest:

I’ve been cheated by you since you know when

So I made up my mind, it must come to an end

Look at me now, will I ever learn?

If you are reading this then you survived the GDPR deluge of emails shuffling up to you during the darkest hours and begging for you to continue to subscribe to the marketing and musings of websites and service providers you thought were long since gone. Thank you for sticking with us.

 

GBP/EUR

I don't know how but I suddenly lose control

There's a fire within my soul

Just one look and I can hear a bell ring

One more look and I forget everything, w-o-o-o-oh

This last week has been largely range bound but none the less exciting. Italy is at the centre of European attention. Remember what I wrote two weeks ago? Possibly not but we made it clear that Italy was going to be the epicentre for the next shockwaves to cross the European Union and here we are. The government’s program has been tamed but will likely result in a high deficit, which is worrying markets. The Italians do not feel that they have benefited from economic recovery and its not as if the Italian electorate enjoys the sound of silence. 

French President Emmanuel Macron has declared his support for a Cottarelli led technocratic government, saying President Mattarella had shown a “great spirit of responsibility” to “protect his country’s institutional and democratic stability”. It’s precisely this sort of statement that will anger the populists and wavering voters. The decision clearly is not democratic – the Italian President is preventing the formation of a government, which has a majority vote and a majority of seats. Protecting institutional stability will not resonate with voters who have a vague anger at “institutions” and “experts” already (does this sound familiar?). The fact it is coming from the French President, whom the Italians already see as subjugating Italian interests for those of France, will only exacerbate this further.

Spanish politics joined the list of worries. A Vote of No Confidence is tabled for Friday, and Ciudadanos say they will give Rajoy their vote, in order that they can engineer an orderly exit and new elections. The same threats to Spanish participation within the EU do not exist any thing like the same way as they do in Italy but make no mistake, we live in extraordinary times.

Mamma mia, here I go again

My my, how can I resist you?

Mamma mia, does it show again?

My my, just how much I've missed you

Yes, I've been broken hearted

Blue since the day we parted

Why, why did I ever let you go?

Mamma mia, now I really know,

My my, I could never let you go.

Spain’s opposition tabled a no-confidence motion after the ruling PP party was convicted of corruption. Euro flash PMI data came out mostly below expectations and implies that the slowdown extends well into the second quarter. The ECB Meeting Minutes reiterated the same cautious messages seen in the rate decision.

I've been angry and sad about things that you do

I can't count all the times that I've told you we're through

And when you go, when you slam the door

I think you know that you won't be away too long

Essentially it is all for the EUR to lose ground and GBP is simply treading water, still beleaguered by its own ongoing Brexit woes.

GBP/EUR movement can be seen on the graph below:

GBP/EUR - 1 Week

 

GBP/USD

You know that I'm not that strong.

Just one look and I can hear a bell ring

One more look and I forget everything, w-o-o-o-oh

While inflation dropped to 2.4% y/y, retail sales leaped by 1.6%, providing promises of a Spring comeback. Q1 GDP growth remained unchanged at 0.1% q/q. GBP/USD also depends on how the USD reacts as it enjoys safe haven flows. USD took advantage of fears related to global trade, in principal the US/China trade war, and the cancellation of the Kim-Trump Summit, which is itself either a masterful ballet of nuanced international relations or a pair of hippos with button related insecurities. The Fed confirmed a rate hike in June via its Meeting Minutes and whilst that will move the market it will likely be priced in when it comes.

GBP/USD movement can be seen on the graph below:

GBP/USD - 1 Week

 

EUR/USD

Mamma mia, here I go again

My my, how can I resist you?

Mamma mia, does it show again?

My my, just how much I've missed you

Yes, I've been broken hearted

Blue since the day we parted

In the US, the Fed minutes showed that the Fed will allow for somewhat higher inflation, but they cemented the likely June rate hike. USD also enjoyed the risk-off sentiment that is a result of trade fears. Trump’s decision to cancel the meeting with Kim Jong-un weighed on markets but had little impact on EUR/USD. 

US ADP Non-Farm Payrolls came out at 178K in May, lower than 190K expected. In addition, the figure for April was revised down from 204K to 163K. 15 minutes later, US GDP was revised down from 2.3% to 2.2%, also worse than expected. The Personal Consumption component dropped from 1.1% to 1%. All in all, the data came out below expectations, but the US Dollar appears to have just shrugged it off.

Why, why did I ever let you go?

Mamma mia, even if I say

Bye bye, leave me now or never

G.D.P.R, it's a game we play

Bye bye doesn't mean forever

 EUR/USD movement can be seen on the graph below:

EUR/USD - 1 Week

 

Not trading your currency is still a risk. The markets will move, volatility and relative values will vary but whatever your foreign currency exchange and international payment needs, you can rely on the team here at Aston Currency Management. Please do not hesitate to get in touch with us, we look forward to hearing from you. Now, if you will excuse me, I have to move to our new offices on Savile Row.

Why, why did I ever let you go

Mamma mia, now I really know

My my, I could never let you go

Have a great week.

Written by Damien Lipman with an appropriate hat tip to Abba.

 

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ACM Update Wednesday 23rd May 2018

Brexit has cost average UK households at least £900, according to Bank of England governor Mark Carney. The central bank governor told MPs: "Real household incomes are about £900 lower than we forecast in 2016." Economists had previously estimated UK households would be £600 worse off. Carney drew criticism for his comments, in which he said the Brexit vote has lowered UK growth by up to 2%. The latest data from the Confederation of British Industry (CBI) has reported UK factory output slid to a two-year low in May. Ultimately for the UK, complications in Brexit negotiations and a weakening economy could continue weighing on GBP value.

GBP/USD

Cable has been under the cosh for another week, struggling with local data and the renewed strength of the USD. The week features the inflation report (today), speeches by Carney and Retail Sales data, both due out tomorrow, as the key events. GB data disappointed with far less shopping than expected in March with a drop of 1.2% was recorded in retail sales. This time, a bounce worth 0.8% is on the cards. Bad weather was associated with the downfall and the first full month of Spring could reveal if the downturn was only temporary.

UK wages rose by 2.6%, only slightly worse than 2.7% expected and the Claimant Count Change showed a jump in jobless claims, another worrying sign. USD resumed its gains, using upward revisions in the retail sales report to move higher. 

 GBP/USD movement can be seen on the graph below:

GBP/USD - 1 Week

GBP/EUR

The ONS reports annualised inflation reads at 2.4%, below consensus expectations for a reading of 2.5%. Monthly CPI data read at 0.4%, below the 0.5% forecast. Importantly for GBP, core CPI read at 2.1%, below the 2.2% forecast. The data is a negative for GBP which has given up the healthy gain on EUR, falling from a daily best at 1.1440 to 1.1378 at the time of writing. The BoE made it clear time and again, most recently via an appearance before Parliament, that it is watching data for guidance as to when next to raise interest rates, and rising interest rates tend to benefit GBP. However, the inflation rate has fallen back from a recent high of 2.8% during late 2017 resulting in the April 2018 figure being the lowest observed since January 2017.

Add the above to the never ending misery faced by Theresa May and her Brexit negotiators permanently facing wobble worse than me on small boat and the ensuing uncertainty we think the data could point towards the BoE opting to leave interest rates unchanged for a period of time to come. 

GBP/EUR movement can be seen on the graph below:

GBP/EUR - 1 Week

EUR/USD

EUR/USD had another largely negative week, falling to the lowest levels in 5 months. EUR/USD bounced back after hitting the new low on Monday but is now struggling again. Will it continue falling? PMI figures and the ECB meeting minutes (tomorrow) stand out but were not available as we went to print. Italy is still the principal cause for grave concern and ultimately instability, venting value for EUR. 

EUR/USD movement can be seen on the graph below:

EUR/USD - 1 Week

Not trading your currency is still a risk. The markets will move, volatility and relative values will vary but whatever your foreign currency exchange and international payment needs, you can rely on the team here at Aston Currency Management. Please do not hesitate to get in touch with us, we look forward to hearing from you. Now, if you will excuse me, I have to prepare for more normal service to resume next week. Have a great week.

Written by Damien Lipman

 

 

 

ACM Update Wednesday 16th May 2018

Is it me or does it seem like there are very loud squawks from the hawks suggesting the world is heading towards war in the Middle East again? I’m sorry about the lack of humour this week but against all other advice and direction, including his own Secretary of Defence, Donal Trump announced his plans to withdraw from the Joint Comprehensive Plan of Action (JCPOA), also known as the Iran nuclear agreement. Trump’s newly installed national security adviser, John Bolton, wrote an article a few years ago entitled “To Stop Iran’s Bomb, Bomb Iran”. By withdrawing from the nuclear agreement, and making clear their goal of escalation, Trump and his administration seem to be creating their own excuse for doing exactly that and make no mistake, this is going to have global repercussions. 

The North Koreans have already expressed doubts on their own dealings with the US because of the “repugnance” they feel for Bolton. It is relevant to see what real effect the opening of the US embassy in Jerusalem will have. There are already heavy condemnations coming from the UN and the international community over the deaths of so many Palestinians and observers. Incredibly USD seems to be benefiting in relative value.

GBP/USD

GBP/USD suffered further losses with no help from the Bank of England who left the rates unchanged and sent a cautious message. GBP/USD dropped below 1.3500 at one point on speculation that the BOE will stay where it is for some time to come. In the US, the dollar initially continued higher but eventually began retreating after inflation came out at 2.1% y/y against 2.2% expected. Has the dollar peaked? Nope! 

The jobs report has been the primary event of the week (yesterday). UK wage numbers came out as expected: 2.6% on the headline (down from 2.8%) and 2.9% when excluding bonuses (up from 2.8%). The as-expected figures mean that real wages are finally up after inflation had eroded them for quite some time. However, this was expected. The GBP/USD dropped ahead of the publication and reached a trough at below 1.347. Yet as the numbers came out, the pair slightly recovered. In the medium term we anticipate GBP to regain recent losses as the markets price in an August rate hike by the BoE. 

 GBP/USD movement can be seen on the graph below:

GBP/USD - 1 Week

 

GBP/EUR

The UK's employment rate has increased to 75.6% – the highest since records began in 1971. New stats from the ONS show there were 32.34 million people in work in the first quarter of the year, 396,000 more than a year ago. The data also shows average weekly earnings increased 2.9% compared with a year earlier. Once inflation is considered, this translates as a 0.4% increase, signalling that the year-long incomes squeeze may finally be over.

The story here is that whilst UK PM May met with backbenchers on Monday and was said to admit that negotiations are at an impasse, with neither of the current options for a customs deal able to work, it is Italy that shows signs of being Europe’s real problem. Apparently, a draft copy of the contract between Five Star and La Lega allegedly includes a plan to write off EUR 250bn in debt from the ECB. Whilst a joint statement suggests that this is an old plan which has been "extensively modified", it has still further spooked the markets and EUR value has suffered. 

Please mark our words here, Italy is likely to a volcano of destabilisation at the centre of Europe. Please don’t forget that the Italians have over USD 2.338trn of sovereign debt outstanding – the highest level of debt in Europe, six times the level of Greece, and the fourth largest debt in the world after US ($14.915trn), Japan ($9.544trn) and China ($4.305trn). In Euro terms, Italian debt stands at EUR 1.966trn – above France at EUR 1.948trn and Germany at EUR 1.647trn. Take from that what you will but we think it’s a bomba a orologeria!

GBP/EUR movement can be seen on the graph below:

 

EUR/USD

EUR/USD fell to new 2018 lows but managed to bounce after the US Dollar suffered its own disappointing data. GDP and inflation figures stand out as German factory orders fell by 0.9% and added to the misery, while the Eurozone’s largest economy’s industrial output rose by 1%, better than expected. The data is not impressive, but at least not all doom and gloom. In the US, inflation fell short of expectations with 2.1% on Core CPI and weighed heavily on the US Dollar. Fed Chair Powell and ECB President Draghi did not provide any news.

The pair fell into oversold conditions and may stabilize for another week. The flow of disappointing euro-zone data may come to a halt. US data has not been that great recently. Possibly some consolidation is likely after the big falls but as we have seen today the (relatively) big falls are not over yet. At the point of publishing we are heading towards lows not seen since December at 1.1789.

EUR/USD movement can be seen on the graph below:

EUR/USD - 1 Week

Not trading your currency is still a risk. The markets will move, volatility and relative values will vary but whatever your foreign currency exchange and international payment needs, you can rely on the team here at Aston Currency Management. Please do not hesitate to get in touch with us, we look forward to hearing from you. Now, if you will excuse me, I have to prepare for a corporate retreat. Have a great week.

Written by Damien Lipman

 

 

 

ACM Update Monday 30th April 2018

A week is a long time in politics they say. It seems even longer in currency markets. We were trading close to 1.44 on Cable (Sterling/Dollar) just over a week ago and like the British weather, it has plummeted drastically. Will it be eternal darkness for Sterling for the rest of the year or will be able to get the Hawaiian tropics out at some stage?

Weak growth figures out of the UK last week has now increased the likelihood that the Bank of England will keep interest rates at 0.5% in May. Was the expectation of a rate rise by 25bps to 0.75% propping up Sterling? Now those waters are muddied will Sterling fall further? You can view the recent moves on Sterling/Dollar on the graph below – 

GBP/USD - 1 Week

If you have a requirement to sell USD and purchase GBP lock in these gains now. Please contact a member of the trading department for a SPOT or Forward rate. 

Might Cable (GBP/USD) take another tumble like an over pampered football player? Perhaps. However, as we have seen on the other side of the trade we were well above 1.40 not long ago and that now seems more a climb than a gentle stroll back up the hill.

With GDP figures coming in at 0.1% I don’t think we can solely blame the ‘Beast from the East’ (how these phrases become common parlance I have no idea). However, it did have an impact. Is there a deeper economic malaise set to become further ingrained now we’re getting down to the finer points of ‘Brexit’? Quite possibly. Please consider a more enhanced risk based approach around Sterling for the remainder of the year. Feel free to contact me directly or one of the trading team to discuss a strategy around your individual requirements. Whilst economic data out of the UK has been rather grim the political situation looks far from rosy. This is having an impact on Sterling too.

If you need to purchase USD from GBP please consider covering off some on SPOT to take out further downside risk and implement market orders to take advantage of any rallies in GBP/USD. Please contact the trading department to discuss technical levels.

This week we have the Federal Reserve Interest rate decision alongside the Monetary policy statement and Non-Farm payrolls (Apr). US wages and inflation are paving the way for an interest rate rise. I’d be surprised if anything changed this week although I expect them to give us the nod that a rate rise will happen over the summer months. This should boost the US Dollar further potentially dragging EUR/USD under 1.20 the figure and maintaining the downside pressure on Cable (GBP/USD). As always with the golden haired chap in the oval office, trade relations could deteriorate at any stage so the US dollar isn’t a one way bet.

Please make sure we have had a conversation prior to Wednesday on your USD requirements. 

Sterling/Euro

Please have a look at the graph below to view recent price movements. 

GBP/EUR - 1 Week

After trading over the 1.14 handle Sterling/Euro has since dropped further. Sterling is being weighed on Brexit concerns around the Irish border issue after EU negotiator Michel Barnier made some comments. This week we have preliminary GDP (QoQ) (Q1) and (YoY) (Q1) out of the Eurozone in addition to the Unemployment Rate (March). Preliminary inflation data in the form of CPI is released on Thursday from the Eurozone rounding off a rather light data week.

If you have a requirement to convert EUR/GBP please get in touch with the trading department and take advantage of the recent moves in your favour. There might be some further room to go in the move so consider implementing market orders to the downside. We’ve largely been trading in a range of 1.11 to 1.16 being toppish so you’re in a good position on SPOT at present.

Purchasing Euro’s? Can you afford for Sterling/Euro to test 1.10? In the current FX landscape anything is possible. Please do consider taking some risk off the table on SPOT whilst looking to take profit on orders on any rallies on GBP/EUR.

If you have any questions please do let me know.

Have a fantastic week

Written by Liam Alexander

ACM Update Tuesday 24th April 2018

The Duke and Duchess of Cambridge gave us all something to smile about yesterday as the world welcomed their third child. Sunday saw the hottest day for a London marathon since records began and Prince Harry joked about the “organised chaos”. Speaking of which, whilst the world shifted its attention from US Stormy weather last week, all eyes were on Syria and GBP looked like it was well on its way to achieve levels not seen since before the Brexit vote. This week it is a different ball game altogether and if you have kept your eye on the proverbial, you will have noticed that EUR/CHF is just a tiny fraction off the 1.200 it was at before the Swiss cut their base rate in January 2015. The painful memory still lingers.

GBP/USD

Back to organised chaos and new numbers from the UK Office of National Statistics (ONS) show government borrowing decreased by £3.5bn to £42.6bn in the past financial year. The figures surprised analysts, who had been expecting borrowing to be £2.6bn higher. The Office for Budget Responsibility, which produces official government forecasts, expects the public sector to borrow £37.1bn over the next year – around a quarter of the amount it borrowed at the peak of the financial crisis. 

GBP/USD had risen to 1.4376 last week, the highest since June 2016, only to tumble around 400 pips from that high as I type this. The key event for this week is the first release of GDP for Q1 due out on Friday. If it disappoints or misses its mark, as much of the data returned last week did, it is likely to have a further negative impact on GBP.

 No matter what happens over the next week, if you need to move GBP to USD, or currencies pegged to USD, in your budgeting for the year, you may also wish to consider taking some of your risk off the table by fixing forward rates of exchange, at least for part of your exposure. Please contact one of the team to discuss mitigating risk for the remaining financial year.

GBP/USD movement can be seen on the graph below:

GBP/USD - 1 Week

GBP/EUR

According to the National Audit Office (NAO), Ministers said the Brexit settlement could cost Britain somewhere from £35bn to £39bn, which a report by the government’s financial watchdog labels as "reasonable", however, it suggests "relatively small changes in events" could push the cost of the settlement up. The NAO warns that the UK could pay an extra £3bn in budget contributions as well as £2.9bn more to the European Development Fund. All this amongst what appears to be the most intractable issue on the hard / soft border with Ireland. 

Please consider mitigating further downside risk to GBP value and possibly take a view with spot trades in the short term. The longer-term consensus view has moved away from GBP crashing, rather than just dropping, against its usual comparators. None the less, recent highs may be a good time to consider establishing market orders.

GBP/EUR movement can be seen on the graph below:

GBP/EUR - 1 Week

EUR/USD

If you were looking for some excitement in the form of volatility, then you have come to the right currency pair. The big focus for this week will be on Thursday for the ECB April meeting, although it will not release new forecasts and is unlikely to change interest rates. None the less, the press conference by Draghi is likely to influence EUR value. A focus on a potential slowdown may hurt, especially if he says it has immediate implications on monetary policy. Conversely, optimism on current growth rates may boost the EUR, preparing us for the next meeting in June, when the ECB may announce what happens after the current program, of buying EUR 30bn worth of bonds expires in September. 

EUR/USD has returned to the level last seen, briefly, at the end of February, today topping out at just over 1.221. Is there more to come? Lets be clear about this, Eurozone economies have been weighed, measured and many have been found wanting at a time when the US keeps surprising all with some positive numbers and a bearish Fed. To plan through a strategy for EUR/USD exposure please contact your relationship manager.

Euro movement against the Dollar can be seen on the graph below:

EUR/USD - 1 Week

Not trading your currency is still a risk. The markets will move, volatility and relative values will vary but whatever your foreign currency exchange and international payment needs, you can rely on the team here at Aston Currency Management. Please do not hesitate to get in touch with us, we look forward to hearing from you. Now, if you will excuse me, I am going to have a flutter on baby names.

Have a great week.

Written by Damien Lipman

 

ACM Update Monday 16th April 2018

Sterling/Euro continues the ascendency. Will the upward trajectory continue or will it come crashing down to earth like a Z list celebrity’s diet and career?

You can view the movements on Sterling/Euro on the graph below -

GBP/EUR 1 Week

Sterling is finally taking a break from the emotion of Brexit related headlines. This should see price action move more on economic fundamentals once again. If you have a requirement to purchase Euro’s from GBP consider locking in some of the recent gains. Please contact the trading department for a rate of exchange to cover a percentage off on a SPOT basis.

Sterling is starting to break out of a range and I see GBP/EUR pushing slightly higher in upcoming trade. As detailed last week, the EUR had strong growth in 2017 although I don’t see that momentum continuing this year. Indeed, there will likely be more of a pronounced divergence in interest rates this year as the UK and US look set to raise rates further. This could see a slight downside bias and sell off of the Euro. In upcoming trade we have a sentiment survey out of Germany this week in the form of the ZEW survey. That is expected to have a negative bias. This will likely weigh on the single currency. To this end, consider implementing market orders to the upside to take advantage of any intraday movements. Please contact the trading department to discuss technical levels.

Sterling/Dollar

Cable (GBP/USD) has broken through 1.43 the figure.

You can view the movements on the graph below – 

GBP/USD - 1 Week

Dollar weakness has dragged the pair higher after a mixed Retail Sales report out of the US today. I expect this move to the upside to continue and a break above 1.44 looks likely. If you have a requirement to purchase some USD take advantage of the recent moves and take some risk off the table. We were trading under 1.40 not so long ago. The market has largely shrugged off many of the recent geopolitical tensions. However, this could of course change dramatically dependent on how things play out in the form of airstrikes, politics and sanctions. Feel free to contact the trading department or get in touch with me directly to discuss your upcoming requirements. 

If you have a requirement to sell USD look at giving yourself a price point to work form on a SPOT basis. I do think we’re going to push higher so if you can achieve under 1.45 look at locking that in. If we start to see GBP/USD retrace then take advantage of this move with a series of market orders. If you would like a member of the trading department to get in touch with you directly please let me know.

This week we have some key data out of the UK.  To kick things off, we have employment data out of the UK on Tuesday in the form of the ILO Unemployment Rate (3M) (Feb) and the Claimant Count Change and rate (March). We have inflation data out on Wednesday in the form of Consumer Price Index (YoY) (March). Consensus is for a print of 2.6%. I don’t expect us to be far off this so any market reaction around this is likely to be limited. Sterling, I believe, will continue to move higher with talk of the Bank of England (BoE) hiking rates next month.

Q2 is now firmly underway and the FX landscape is going to shift this year. Please make sure you have a strategy in place to mitigate your currency risk. 

If you have any questions please do let me know. 

Have a fantastic week

Written by Liam Alexander

ACM Update Monday 9th April 2018

Sterling has a lustre like the manicured lawns of Augusta, Georgia at present. Will Sterling continue to climb the leaderboard in Q2 or are we destined to end up in a bunker frantically trying to hack our way out?

Sterling/Dollar

Sterling/Dollar has a slight upside bias at present. We’re starting to look toppish at current levels though after the recent move higher. We had the NFP (Non-Farm Payroll) figures released on Friday and these disappointed to the downside. Expectations were for a print of 193k although the actual number came in at 103K. Cable (GBP/USD) edged higher on the back of the release although not in emphatic fashion. Yes, the figure was disappointing for March although the longer term trend of strong growth in the US remains.

If you have a requirement to purchase USD from Sterling consider covering off a portion of your exposure on a SPOT basis at current levels. Take advantage of the recent moves in your favour. Please contact the trading department for a rate of exchange.

You can view the recent movements on Cable (Sterling/Dollar) on the graph below –

GBP/USD - 1 WEEK

Sterling/Dollar is in a range at present and we’ll either break back below 1.40 and gradually push lower or we’ll break through 1.45. I think the UK and Sterling has weathered the majority of the Brexit ‘storm’ so far rather well. The downside risks may have been overplayed. We will have moves to the downside to manage although on an annual basis I expect Cable (GBP/USD) to finish trading around 1.45/1.46. If you can achieve over 1.40 as a price point to work from I would lock this in now to take some risk off the table. We can then work out a strategy with you utilising a mix of SPOT, Forward Contracts and Market Orders to try and achieve a higher average FX rate for the year. Please feel free to get in touch directly to discuss.

Whilst the UK has its part to play the US will have a large say in the direction the Dollar takes. Whilst consumer confidence in the US is at a 14 year high, factory orders are rising, employment figures and growth are strong and I expect the Federal Reserve to raise rates in May, there are some headwinds to dollar strength. Geo politics being the main one. Whilst the Dollar remains a global safe haven a continuing protectionist outlook from the US may give rise to a sell off in the dollar. Please make sure you have a strategy in place to mitigate currency risk. Doing nothing is speculating. This year will continue to be volatile and the FX landscape can shift extremely quickly.

Sterling/Euro

We’re now trading towards the top of the recent range. It wasn’t long ago we were in the 1.11’s. If you can achieve over 1.14 purchasing EUR from GBP I would consider taking advantage of the recent price movement. Please contact the trading department to lock in a SPOT trade.

You can view the recent moves in GBP/EUR on the graph below –

GBP/EUR - 1 Week

 

The Euro has been under pressure with EUR/USD coming off highs above 1.24 to trade in the 1.22s. Growth in the Eurozone has slowed markedly after the faster than expected pace of growth last year. Inflation remains well below the ECB (European Central Banks) target of 2%. In addition, there will be a more pronounced divergence in interest rates this year with the Bank of England and the Federal Reserve likely to raise rates. This should translate to a higher rate for both Sterling and the US Dollar against the Euro.

If you have a requirement to purchase Euros and have projections on your FX exposure for the remainder of 2018 please get in touch and we can put a plan in place to take advantage of moves in your favour.

Selling Euro’s? Decision time. Whilst we aren’t trading in the 1.11’s anymore rates are still competitive. My view is cover off some of your exposure now. There will be some dips with Brexit related news likely to weigh on Sterling from time to time so there will be opportunities to ‘average up’ your FX rate at certain times.

We have Mario Draghi, the ECB President, speaking on Wednesday. He will likely shape the direction of the Euro short term so think about covering off some of your requirements prior to this. Rounding off the week in terms of market events is the Bank of England Governor, Mark Carney, speaking on Thursday. Should there be any hawkish language surrounding rates we should see Sterling benefit from this.

If you have any questions or would like to discuss a specific topic in more detail please feel free to get in touch.

Have a fantastic week

Written by Liam Alexander

ACM Update Monday 26th March 2018

The US Dollar is wobbling like a punch drunk boxer, reeling more from political blows than economic. Sterling/Dollar has sustained the recent upside move and is testing 1.42 the figure. Will we keep this momentum or will we retrace back below 1.40? GDP Q4 data out on Wednesday from the US will give us some direction this week.

Sterling gained last week on the back of the transition deal announcement with the EU. That should give Sterling some respite from Brexit related headlines for a while. The unemployment rate also fell back to 4.3% in the UK.

Sterling is going into Q2 on the front foot.

You can view the movements last week on Cable (Sterling/Dollar) on the graph below –

 GBP/USD - 1 Week

GBP/USD - 1 Week

If you have a USD requirement from Sterling do consider locking in some of the recent gains at current levels on a SPOT basis or a short-dated forward contract. As we so often say, doing nothing is speculating. Take some risk off the table. Please contact the trading department for rates of exchange.

Will the UK raise rates in May? Most likely. Will Sterling move higher against the US Dollar in Q2? We are at strong levels now although I do see us moving up to 1.43 with a potential test of 1.45 in May. Whilst I would suggest covering off a portion of your exposure now to take advantage of recent moves I would also leave some room to take advantage of any further upside.

Sterling is on a fairly strong footing at the moment having had better than expected Retail Sales last week in addition to good employment figures. Consider implementing market orders at 1.43/1.44 and 1.45 for Q2. To discuss technical levels to aim for please get in touch with the trading department and they can structure these orders for you.

The US Dollar is on the back foot despite the Federal Reserve raising rates by 25bps to 1.75% last week. The outlook for the US economy is positive although there is the small matter of a potential trade war with China giving a selling bias to the Dollar at present. It looks pretty ‘Stormy’ out there for the Dollar at the moment.

If you have a USD/GBP exposure can you afford the rate to potentially challenge 1.45 the figure? Take some risk off the table and give yourself a price point to work from. We can then discuss a specific strategy for you in Q2 to manage some of the undoubted turbulence that will be played out. Feel free to contact me directly to discuss in more detail.

Sterling/Euro

We challenged the dizzying heights of 1.15 last week after a strong move to the upside.

You can view the movements on the graph below –

GBP/EUR - 1 Week

We have given up some of the gains and we’re now trading in a tight range. I don’t expect too much volatility this week heading into the Easter break as we have limited data releases.

If you need to purchase EUR from GBP lock in some of the gains. We were trading in the 1.11’s not too long ago. Is there room to push higher? We will need to see a sustained break above the 1.15 level to justify any strong upside bias. Please contact the trading department for a SPOT rate.

Selling Euro’s? Whilst historically you are still at competitive levels consider market orders around 1.1450/1.14 to take advantage of any retracement of last week’s move.

We have a fairly quiet week on the data front. Q4 GDP figures out of the US will be the release most investors and traders look for this week.

If you have any questions please do get in touch.

Have a fantastic week.

Written by Liam Alexander

ACM Update Tuesday 20th March 2018

Where do I even begin this week’s report!? We have suspected Russian involvement in the poisoning of a former spy, his daughter, a policeman and other members of the British public, just before an apparent 76% percent victory for Russia’s long serving President (and occasional Prime Minister). This is amid multiple claims of ballot fraud and irregularities from the independent election monitoring group Golos and others, but no one seems to take much notice. We have also had a revolving door to the HR department at the Whitehouse and amidst all of that the UK actually agreed with the EU on the Brexit transition period, triggering a reasonably dramatic increase in the value of GBP against both EUR and USD.

I am going to format the report slightly differently:

Question: Have you ever heard of a political risk gauge called the Geopolitical Risk Index (GPR Index)?

Answer: It is a tool that helps to make some sense of the “Not Normal” that is going on around us and is often cited by policy-makers, investors, and media as one of the key determinants of economic decisions. The GPR Index is a unit of measure to indicate the frequency of articles from leading media outlets (mostly newspapers) discussing increased tension between states, wars, terrorism and other negative events.

High GPR induces adverse effects on US employment and trade, a drop in US stock market, a decline in real activity and stock prices in other advanced economies. It brings about capital outflows from emerging economies to safe havens. Recent peaks in the GPR Index have included Isis escalation in 2014, the Paris attacks in 2015 and raised tensions due to the nuclear threat posed by North Korea in 2017. Last week the GPR Index hit its highest point since the 2003 invasion of Iraq.

This is Saxo Bank’s representation of the GPR Index, published by Ole Hansen:

I realise by now that you may be wondering what has any of this got to do with relative currency values and what you need to know in order to better time your trades and mitigate your currency risk exposure. We are getting there. Its all about who carries the most risk and how that transfers to relative value.  What has caused the spike in the GPR Index last week?

The threat of trade war.

Trade war brings huge political uncertainty and has been Trump’s favourite topic of conversation, besides seemingly shouting “You’re fired!” at almost everyone except his daughter Ivanka.  Several strategists have made the case that the asset bearing the brunt of political uncertainty, not to mention the implications of a full-blown trade war sparked by tariffs on steel and aluminium imports, is the USD. U.S. stocks enjoyed a stellar year whilst the USD, as measured by the ICE USD Index, lost 10% of its value gauged against a half-dozen rivals, including the EUR and JPY.

Could this now be prescribing USD weakness and continued decline in the coming months?

We never profess to have a crystal ball but certainly there might be a significant argument for looking at mitigating further downside risk to USD exposure.

 GBP/USD movement can be seen on the graph below:

GBP/USD - 1 Week

GBP/EUR

After yesterday’s pleasant surprise for GBP value increase against the EUR, Thursday will be the next main event with the EU Summit taking place. The leaders of the European Union convene to discuss various matters and Brexit leads the agenda. Will they make progress on trade, the rights of citizens, and the Irish border? Finalizing the transition deal is the key event and Ireland is high on the agenda. The UK wants to be out of the Customs Union but with no customs checks between the Republic of Ireland and Northern Ireland. This circle will be hard to square. A breakup of talks could weigh on the GBP.

On Friday we will receive the Bank of England Quarterly Bulletin. This is, frankly, likely to move the markets. Clients wanting to take advantage of the value spike for GBP may wish to consider getting in touch with us and covering requirements with spot trades for now or fixing forward rates for the near future.

GBP/EUR movement can be seen on the graph below:

GBP/EUR - 1 Week

EUR/USD

The pair traded in a narrow range and eventually ended the week lower once again. There is not much to be said that is positive for either side yet. EUR suffers from fears that growth has peaked while the Fed may not be as hawkish as some expect. If anything is going to make a dramatic difference over the coming week it is not an expected event.

EUR/USD movement, or the lack of it, can be seen on the graph below:

EUR/USD - 1 Week

Not trading your currency is still a risk. The markets will move, volatility and relative values will vary but whatever your foreign currency exchange and international payment needs, you can rely on the team here at Aston Currency Management. Please do not hesitate to get in touch with us, we look forward to hearing from you. Now, if you will excuse me, I have to find my Terms and Conditions for Facebook. Have a great week.

Written by Damien Lipman

ACM Update Monday 12th March 2018

Sterling’s battle with the Euro continues. Whilst it isn’t quite as venomous as the frightening scenes at the Crufts dog show yesterday, there remains a battle to stamp some authority and create sustained momentum.  

Will Sterling recover some ground against the Euro this week? After hitting lows around 1.1150 we had a rebound towards the end of the week with a jump back above 1.12. We have since broken through 1.1250. You can view the moves on the graph below –

GBP/EUR - 1 Week

I expect Sterling/Euro to move back into the 1.13’s this week. The Euro remains on the backfoot after the ECB meeting where rates were kept on hold and QE remained unchanged. I expect attention to move to Sterling this week after the Italian election, German vote and ECB meeting put the Euro front and centre.

If you have a requirement to purchase Euro’s from Sterling consider placing market orders at 1.13 to take advantage of any intraday moves to the upside. Please contact a member of the trading department to implement an order. The key event this month for Sterling is the EU summit on 22nd-23rd March in Brussels. If there is no transition deal in place this will create further uncertainty. Take some risk off the table and look at covering off any positions prior to this event.

Sterling has weathered the Brexit noise relatively well recently and isn’t moved by it. Sterling is being largely traded on economic realities at present. Is the UK economy swinging from the rafters compared to other EU economies? No. Is the UK economy improving? Yes. Will Philip Hammond, the Chancellor of the Exchequer, say anything riveting or implement any new policies tomorrow? Unlikely. What he will communicate is that productivity and public finances have improved with borrowing less than expected for the fiscal year. I expect a short-term bounce in GBP tomorrow. Please contact the trading department to discuss technical levels should you have a requirement for Euro’s from Sterling.

If you need to convert Euro’s back to Sterling consider covering off a large proportion of your requirements at current levels on SPOT. We have traded over 1.14 recently so if you can achieve anything around or under 1.13 I would consider this a good level to secure. Might we fall further? Yes. However, look at things on a historical basis. Trading at 1.20/0.833 – 1.25/0.80 on GBP/EUR or the inverse EUR/GBP used to be considered ‘fair value’.  

Please contact the trading department to discuss your individual requirements.

Sterling/Dollar

I expect Cable (GBP/USD) to push back above 1.40 the figure. If you are holding USD and need Sterling look at securing at current levels. Today there isn’t much data out so I expect trading to be range bound. Please contact the trading department for pricing. We had the NFP (Non-Farm Payroll) figure released on Friday that massively smashed expectations of a forecast of 200K with a print of 313K. However, the Dollar didn’t gain too much impetus with some of the details within the report on wage growth raising some questions around inflation.

Please do consider utilising market orders to execute at 1.40 if you have some upcoming USD requirements from GBP. Should we break through this psychological level then we can discuss ‘averaging up’ your FX rate in Q2.

You can view recent movements on Sterling/Dollar on the graph below –

GBP/USD - 1 Week

If you have any questions please feel free to contact me directly.

Have a fantastic week.

Written by Liam Alexander