ACM Update Monday 12th August 2019

Sterling continues its descent lower. The Pound has touched new multi-year lows against both the US Dollar and Euro. Have we hit the lows or is there more room to move lower?

Sterling dropped further on Friday. Figures showed that the economy shrunk by 0.2% in Q2, the worst performance in more than six years. Is it all down to Brexit doom and gloom? No. There is a global slowdown, consumer confidence and retail sales aren’t where they should be due to uncertainty on the economy, we had car manufacturing plants shutting down and the unwinding of stockpiling in Q1 that fed into Q2 figures. If we look at Germany’s Q2 numbers they contracted at 0.1%. Some semblance of balance is required rather than the red top headlines.

There is no hiding from it though, UK PLC isn’t where it should be. Where next for the embattled pound? As I’ve said numerous times over the past few months I’ve always thought the summer was going to prove Sterling negative. I don’t see much upside over the next few weeks although breaking through 1.20 to the downside on Cable (Sterling/Dollar) will prove a challenge as there will be strong resistance at this psychological level.

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

If you are holding US Dollars I would look at covering off a sizeable portion of your holdings at current levels. I think there will be a lot of resistance at 1.20 the figure. Please contact the trading department for a SPOT or Forward rate on USD/GBP. To put into perspective where we are currently trading, the last time we were at these levels was 1985. The movie ‘Back to the Future’ was released that year. How we could all do with the DeLorean now!

We have the ILO Unemployment Rate (3M) Jun released tomorrow followed by Average Earnings excluding bonus (3Mo/Yr) (Jun). Both numbers are expected to print 3.8%. Any movement in a positive direction may give Sterling a boost to the upside. From across the pond tomorrow we have inflation data in the form CPI (Consumer Price Index) releases and then UK CPI on Wednesday. Finishing things off from a macro perspective we have US Retail Sales released on Thursday.

If you need to purchase USD from Sterling I would look at implementing take profit orders to the upside and try and take advantage of any intraday moves in your favour. Might Sterling/Dollar be trading back at 1.30-1.40 end of October? That depends on a deal being cobbled together – that is a big ‘if’ at present with the UK Governments stance on negotiating at present. However, there is no ‘normal’ or ‘new normal’ any longer so 1.30-1.40 is a possibility end of October. Likewise, 1.15 on Sterling/Dollar is a possibility. I’d always suggest covering off some of your exposure then you have a level to work from and you de-risk your position. Please do get in touch with our trading department to discuss your individual requirements.

Sterling/Euro?

We continue the march towards parity. Do I think we’ll reach parity? No. Sterling though in the interim is giving it a damn good shot to try and get us there. We’ve hit a 31 month low against the single currency. I feel there is still room to move lower in the short-term.

 You can view the recent movements in the graph below –

If you are holding EUR at present then look at covering off a large percentage if not all of your exposure at these levels. Might we move a few percentage points lower? Perhaps. However, equally, we might move back up to the 1.11-1.14 levels on the back of any weakening EU data and a strong showing from the UK. I would suggest covering off an amount at these levels will serve you well as a price point to work from. Please contact the trading department to work through technical levels and pricing.

On the data front this week we have inflation data and the ZEW sentiment survey out from Germany. We also have preliminary GDP (QoQ) (Q2) out from Germany and the Eurozone on Wednesday. All these releases have the potential to impact the Euro and in turn move GBP/EUR. If you have a requirement to purchase Euro’s from GBP I would look at implementing some take profit orders and try and take advantage of any breaks in the downward trend. Parity is a possibility for Sterling/Euro so please make sure you have covered off at least part of your exposure in upcoming trade. It gives you some clarity on your position. Please do get in touch with the trading department to discuss your upcoming requirements over the coming months.

If you have any questions please do let me know.

Have a fantastic week.

Written by Liam Alexander

ACM Update Monday 29th July 2019

The UK’s new Prime Minister Boris Johnson has wasted no time in making his transition into 10 Downing Street. He demolished the cabinet and has set about tackling Brexit with a new ‘War Cabinet’ that includes six senior ministers. Indeed, Brexit will be delivered ‘by any means necessary’. It should be an interesting few months at the very least!

The change of stance and approach of the UK Government now means there is a real chance of a ‘No deal’ Brexit on the 31st October. Whilst the aim is still to strike a deal with the EU the UK are now preparing to exit without a deal. Will the EU blink or will we leave without a deal? We’ll know in a few short months.

What has happened to Sterling/Dollar (Cable)? We have retreated to the downside posting session lows. We are now trading in the low 1.23s.

You can view the movements on the graph below –

As I’m sure you’re bored of hearing me say if you hold US Dollars take advantage of these moves and lock in some Sterling at current levels. Please contact the trading department for a SPOT rate. Might we move lower still? Quite possibly. In addition to covering off a SPOT trade look at staggering some take profit orders. I think there’s more downside to go in this trade. If we couple the Sterling negative news there is also Dollar strength that doesn’t show much signs of abating. The annualised growth rate in Q2 printed 2.1% that came in better than expected. In addition to this, there is now less chance of numerous rate cuts by the Federal Reserve. Whilst I expect a 25bps cut this week from the Fed this is really a cautionary move than a sustained policy move. In what is a busy week for economic releases we have the NFP (Non-Farm payroll) figure released on Friday with a print of 170K expected. The previous figure was +224K. Expect some volatility around this release.

From a UK perspective we have the Bank of England meeting this Thursday. Will the BoE remain hawkish on their view of a smooth Brexit and their intention to raise rates? With the US likely to cut rates this week and the ECB last week preparing fresh stimulus through rate cuts and relaunching asset purchases due to low inflation, the UK are going against the grain of other Central Banks? However, with the chances of an economic shock to the UK increasing with the appointment of Boris Johnson would the BoE take a more cautious approach to interest rates now and potentially leave the option of cutting rates on the table? Potentially. The BoE will likely go into a ‘wait and see’ approach.

If you are buying US Dollars is there any respite in sight? I would suggest not for the rest of the summer. Sterling/Dollar will be on the back foot. Might Sterling/Dollar drop below 1.20 the figure? Potentially. I would suggest drawing a line in the sand and covering off some USD on a SPOT basis to give you a price point to work from. Come end of October? Where will GBP/USD be trading at? Your guess is as good as mine.

On Sterling/Euro we have seen a drop since Friday on this currency pair.

You can view the movements on the graph below –

Again, this is down to expectations of a ‘No deal’ Brexit increasing under the new PM Boris Johnson. We are trading back under 1.11 the figure. We have inflation figures out of Germany tomorrow in the form of Preliminary Harmonized Index of Consumer Prices (YoY) (Jul) with a print of 1.3% expected. On Wednesday we have GDP (YoY) (Q2) with expectations of a print of 1.0% that is down from 1.2% previously. There is also Eurozone CPI figures released that day with a print of 1.1% expected.

As mentioned previously, the Bank of England meet this week so any language that is slightly bearish will impact Sterling and we may see another move lower on Sterling/Euro. If you are holding EUR please consider taking advantage of current levels and lock in some of the gains. If you contact the trading department directly they will be able to provide you with rates of exchange and discuss technical levels to aim for in upcoming trade. If you are buying EUR from GBP and didn’t take advantage of the shift higher to 1.12 last week do consider implementing orders to the upside should we see any weakness in European data this week. Again, please contact the trading department to discuss this.

If you have any questions please do get in touch.

Have a fantastic week.

Written by Liam Alexander

ACM Update Monday 22nd July 2019

Drum roll. The voting for the Conservative Leadership is almost over. The revolving door will usher in the new Prime Minister tomorrow and they will take over on Wednesday. With Boris Johnson expected to win that could mean our Chancellor Philip Hammond exiting. Music and the Titanic comes to mind.

This week politics will again be a key driver for the embattled Pound. Whilst the expected heatwave will bring a smile to the face any thoughts of Sterling having a day in the sun any time soon may be a wish too far. There may be the occasional bounce on an intraday basis for Sterling although the outlook over the summer months still has a negative bias.

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

As you can see we dipped under 1.24 the figure last week. That was the lowest level since March 2017. We have since had a slight rebound although I think we will struggle to breakthrough 1.25 and sustain the break higher.

There isn’t much data out this week. We have the FPC (Financial Policy Committee) minutes out tomorrow from the Bank of England although this will be overshadowed by politics. On Friday we have Preliminary GDP Annualised Q2 from the US. We expect a print of 1.9%. Should we see a more positive number then we would expect the Dollar to regain the ascendancy. Expectations for the Fed meeting later this month is for a cut in interest rates. I’d expect a 25bp cut as I’ve mentioned previously. If you have an upcoming USD requirement consider a SPOT trade at current levels. Historically, we are at fantastic levels. I do think there is more to run to the downside in GBP/USD so consider a market order at 1.2450 and 1.24 over the summer months. These would be great levels to execute at. Could Sterling/Dollar conceivably trade below 1.20 this summer? Possibly although I think we’ll meet a large amount of resistance at that level.

If you need to purchase USD from GBP then yes the rates aren’t particularly great. However, if there is a ‘No deal’ Brexit in October we could trade at 1.15 or even below that level on Cable (Sterling/Dollar). I would consider covering off some of your exposure at current levels. Please contact the trading department for a rate of exchange.

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

Sterling/Euro dropped down to the mid 1.10’s in trading last week. It has recovered slightly and we are now back above 1.11. If you are holding EUR and need to move back into GBP look at doing a large percentage of your exposure on a SPOT basis at current levels. We are trading towards the top of the range over the past 6 months so make sure you take advantage of the recent moves in your favour. Please contact the trading department for a rate of exchange or to implement a take profit order.

If you’re purchasing Euro’s then at present it is a case of keeping you above 1.10 the figure. I don’t see any potential for a large rebound unfortunately over the summer months. As always, Sterling is at the mercy of politics and the outcome of Brexit. We have the ECB interest decision out on Thursday followed by the ECB monetary policy statement. Rates will be left on hold and I’d expect Draghi to be relatively dovish.

Expect some event risk this week around the Conservative leadership announcement. I would expect volatility to return and I would expect it to increase dramatically towards the end of the summer. Please contact one of the team to discuss your individual requirements.

If you have any questions please let us know.

Have a great week and enjoy the sun!

Written by Liam Alexander

ACM Update Monday 8th July 2019

Cable (Sterling/Dollar) broke through the psychological level of 1.25 the figure last week. Will Sterling/Dollar be as volatile as the tennis player Nick Kyrgios? Unlikely. As we have said previously, we expect Sterling to remain under pressure for the summer months.

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

Sterling/Dollar was trading at the lowest levels since January last week. We have since had a rebound higher although this may prove short-lived. The move was largely Dollar driven with the NFP (Non-Farm payroll) figure printing an increase of +224K jobs. This number came in well above expectations that gave the Dollar a boost across the board. The clarification that the US jobs market is in good health will mean that the Federal Reserve will only cut interest rates by 25 basis points at the end of the month. Might the Federal Reserve not feel the need to now cut rates at all? Perhaps. However, they have communicated a rate cut to markets and I expect a 25bps cut. A 50bps cut would be a shock so I think that’s off the table.

This week we have a relatively quiet week on the data front. The main release from the US is inflation based. We have the Consumer Price Index (CPI) released (YoY) and (MoM) on Thursday from the US with prints of 2% and 0.2% expected respectively. If the figures come in bang on expectations or slightly better? Expect the Dollar to make some gains against both Sterling and the Euro. We also have the FOMC minutes on Wednesday so this may move the Dollar.

In terms of the Sterling angle this week? It looks rather subdued. We can all focus on the tennis at Wimbledon quite frankly. There isn’t much that is going to shift Sterling so it may drift. It will likely move lower as I don’t see anything that is going to aid Sterling to the upside. We have GDP (MoM) (May) released on Wednesday morning from the UK with expectations for a print of 0.3%. Should this come in lower then expect Sterling to dump further.

If you hold USD and need to move back into Sterling take advantage of the recent moves lower on a SPOT basis. Please contact the trading department for a rate of exchange. There may be room for it to move lower so also do consider implementing take profit orders to the downside should we see any intraday moves in your favour. Again, please contact the trading department to implement these orders.

If you need to purchase USD from GBP? Whilst rates are not great at present could they potentially fall to 1.20 and below? Yes. With the potential for the UK to exit Europe with a ‘No deal’ then a sizeable fall in GBP/USD is a possibility. Please speak to our trading department to discuss your options between now and the end of October.

Sterling/Euro? Like Sterling/Dollar we shifted lower. We are currently trading around 1.1150. Is there more room to go? If we have a sustained break to the downside under 1.11 then a gradual trend lower may develop. The only salvation for Sterling on this pair is that the Euro is hardly firing on all cylinders. I’d expect Sterling/Euro to remain in a range of 1.10-1.13 over the summer months. I wouldn’t expect any massive moves in either direction.

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

This week we don’t have too much data out of the Eurozone. We have inflation data out of Germany with the release of Harmonized Index of Consumer Prices (YoY) (Jun) although under than that there isn’t much that the market will be looking at.

Any moves this week will likely be on commentary from Central Bank officials or our beloved political figures. Brexit will continue for the summer months. Whilst not as annoying as reading about Love Island it is certainly getting close!

Have a fantastic week.

Any questions please let me know.

Written by Liam Alexander

ACM Update Monday 24th June 2019

The Conservative leadership battle and Brexit rumbles on. Putting the Magna Carta together was more straightforward than Brexit.

Sterling will remain under pressure for most of the summer. There will be some brief moments of sanctuary for GBP although I don’t expect much more than that. Whilst Cable (Sterling/Dollar) has ‘rallied’ this is purely down to Dollar weakness.

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

Sterling/Dollar had dropped significantly into the low 1.25’s. The dollar has since been dumped with geopolitical tensions rising with Iran and the ongoing doubts over trade with China. Any movements on Sterling/Dollar this week are likely to be driven by commentary and politics rather than any data led activity. Indeed, the calendar is extremely light this week. We have GDP Annualised (Q1) out of the US on Wednesday with a print of 3.1% expected. Out of the UK this week we have the Bank of England Governor Mark Carney speaking and the inflation report hearings. In addition, rounding off the week on Friday we have GDP (QoQ) (Q1) released. This is expected to be revised down to 0.2% from 0.5%.

If you are holding USD and missed out on executing at the lower levels last week then do consider implementing take profit orders this week. I’d expect to see a retracement on Cable (GBP/USD) from the recent highs in the mid 1.27’s. Please contact the trading department to discuss levels.

On Sterling/Euro we are trading around the 1.12 mark. If you hold EUR I would consider taking advantage of the recent moves and lock in some of your exposure on SPOT transaction. Please contact the trading department for a rate of exchange. There is some second and third tier data out of the Eurozone this week although nothing to write home about. We will largely be moved by politics.

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

The chances of a ‘No deal’ Brexit have increased. This is going to weigh on Sterling over the next few months. If you hold GBP and need to purchase EUR you are probably looking at the rate and thinking “I’ll hold off for now until it goes up”. What the last few years have taught us is that anything is possible and the ‘normal’ or ‘new normal’ doesn’t really apply anymore. What if Sterling/Euro went to 1.01 end of year? How would that impact your position? Whilst it is unlikely it isn’t that far fetched. Do consider at least covering some of your exposure off at current levels and put a marker in the sand. If there is a move higher in GBP/EUR with Greece and Italy’s issues impacting the single currency then you can take advantage if that happens. Please discuss rates with the trading department and put a plan in place over the summer months. That way you can enjoy the cocktails by the pool without worrying what UK PLC has done to impact Sterling since you last put on the suntan lotion. 

If you have any questions please do let me know.

Have a fantastic week and enjoy the sun that looks like it has finally arrived!

Written by Liam Alexander

ACM Update Monday 17th June 2019

The Conservative leadership race took to the television studios last night with a debate that centred around Brexit. It had the feel of the TV gameshow ‘Pointless’ about it. We’ll know soon enough if the ‘contestants’ musings and posturing are any match for the main contestant that didn’t take part in the debate. Time will tell.

What does UK political upheaval create for Sterling? Uncertainty. What does that do for Sterling? Yep, it creates potential weakness for the Pound. Sterling/Dollar is now trading at the lowest levels since January.

You can view the movements on the graph below –

Whilst there has been some pressure on Sterling the main driver has been the US Dollar. The Retail Sales Control Group figure out of the US on Friday rose by 0.5% (consumers spent more than expected in May). In addition, GDP growth forecasts are being revised higher. This all points to a continuation of a stronger dollar for the foreseeable future. The main event this week is the Federal Reserve meeting on Wednesday. Will they or won’t they cut interest rates? Probably neither is the answer. The US has had some mixed data recently with the jobs report posting a meagre gain of 75K. The market is pricing in two interest rate cuts this year. Should the Fed communicate a scaling back to one or perhaps no rate cuts this year then the US Dollar will push even higher. Couple this with an embattled Sterling for the rest of the summer and we could open up a move below 1.25 the figure on Sterling/Dollar. Of course, should the Fed indicate that two rate cuts are still on the cards then expect the Dollar to come off slightly. Fed Chairman Powell may also discuss and share their thoughts around inflation/jobs/global growth/trade wars (potentially).

If you hold USD I would consider a SPOT trade at current levels and lock in the recent gains. You are at fantastic levels. I do believe Sterling/Dollar has another move lower in it although this may not come to fruition. Lock in some of your exposure on SPOT and then implement some take profit orders around 1.26 and below. You can contact the trading department directly to implement these trades and discuss specific technical levels to execute at.

If you need to purchase USD from Sterling it is a case of sitting tight for now. How long sitting tight means though is open to debate. I don’t see a huge amount of upside on Sterling/Dollar unless a turn in sentiment on the dollar occurs this week. It may well be October time before any meaningful change for Sterling transpires. I expect Sterling to be on the ropes over the summer months. If you need to purchase Dollars this month I would look at doing some now as we may drop further. Again, please contact the trading department to discuss specific levels.

We have a heavy week of data and commentary this week so the levels around the majors may move significantly. Sterling/Euro has been trading around the 1.12-1.13 level for a while now and we may move out of this tight trading range this week.

You can view the recent movements on the graph below –

Where now for Sterling/Euro? I think there’s still room to run to the downside and I’m neutral to negative on GBP/EUR. I think we’ll break through 1.12 the figure in upcoming trade and there is a chance we could sustain this move lower. This week we have the ECB President, Mario Draghi, speaking in addition to an economic sentiment survey (ZEW) released from Germany tomorrow. From a UK perspective we have the Bank of England Governor, Mark Carney, speaking on Tuesday with the BOE interest rate decision and minutes released on Thursday. I expect this to be a non-event.  Sandwiched in between this on Wednesday we have inflation data released from the UK in the form of CPI (YoY) (May) released with a print of 2% expected, down slightly from previous 2.1%.

If you hold EUR and need to move into Sterling do take some risk off the table and lock in some of your exposure on a SPOT basis. In addition, stagger some orders to the downside to take advantage of any intraday moves in your favour.

If you are purchasing Euro’s there may be some opportunities around Draghi’s speeches and any weak data out of the Eurozone to see some spikes higher. Please discuss your specific requirements with the trading department whom will be on hand to answer any questions you may have.

Have a fantastic week.

Written by Liam Alexander

ACM Update Monday 10th June 2019

The Conservative Party leadership contest is becoming like an episode of the TV show the Apprentice. Whilst not riveting viewing it does at least distract us from all things Brexit for a short period of time.                                                                                                                                                                                                      

Sterling will be open to downside risk during the leadership contest. With uncertainty comes volatility and increased risk for the Pound. After nominations close MP’s will vote in a series of ballots. The first is on Thursday 13th June with the new leader announced on the week commencing 22nd July. Dependent on whom is elected this may give Sterling a shot in the arm or more than likely the reaction may be muted.

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

Cable (GBP/USD) pushed slightly higher in trading towards the end of last week. This was due in part to a sell off in the US Dollar. We had NFP (Non-Farm Payrolls) released on Friday that disappointed to the downside with a print of +75K against a consensus of +185K. Wage growth (MoM) also disappointed with a print of 0.2 against expectations of 0.3% and the (YoY) figures came in at 3.1% against expectations of 3.2%. Will the sell off in the dollar continue? With the second set of poor figures in a matter of months there is now the case for the Fed to take action with a rate cut. However, as trade tensions and trade wars continue this may limit any fall in the US Dollar as investors will flock to the US Dollar as a safe haven.

We have had a raft of poor figures out of the UK this morning with Manufacturing Production (MoM) and (YoY) (Apr) and Industrial Production (MoM) and (YoY) (Apr) all disappointing to the downside. Sterling/Dollar has given up some of the gains made overnight in the Asian session. I view Sterling/Dollar as neutral with a slight bias to the downside in upcoming trade. If you have a requirement to sell USD/GBP I would consider firstly covering off some of your requirements on a SPOT basis and then implement take profit orders to the downside at staggered levels to take advantage of any intraday movements in your favour. Please contact the trading department to discuss technical levels and positions.

If you need to purchase USD from Sterling? It really depends on your timeline. If you can hold out for now then do so. You may want to implement some market orders so if we do see a further sell off in the Dollar you can take advantage of any spikes in the market.  We have some data out of the US this week that may have some bearing on the direction of the dollar. We have inflation data out on Wednesday in the form of CPI (ex Food and Energy) (MoM) and (YoY) May with prints of 0.2% and 2.1% expected respectively. Friday we have Retail Sales out of the US rounding off the week.

Sterling/Euro

If you are holding EUR consider taking advantage of the recent moves in GBP/EUR. I would look at covering off a sizeable portion of your exposure on a SPOT basis. This gives you a great price point to work from. Please contact the trading department for a rate of exchange. There may well be an opportunity for a further push lower although do take some risk off the table at current levels. We can then look to average up your exchange rate through a series of take profit orders at the appropriate levels.

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

Tomorrow we have the ILO Unemployment rate (3M) (Apr) released with expectations for a print of 3.9% against a previous 3.8%. We also have Average Earnings Excluding Bonus (3Mo/Yr) (Apr) released tomorrow from the UK. From the European side, we have the ECB president, Mario Draghi speaking on Wednesday. He will keep his accommodative monetary policy in place with interest rates in negative territory to help support growth and cut the costs of the Governments of Greece/Italy when it comes to refinancing their maturing debts. With growth and inflation in the Eurozone taking a hit again last month the ECB will be ready to adjust interest rates even lower if global headwinds continue to impact the Eurozone.

With the ‘summer’ months around the corner and the UK going through dramatic political change then Sterling is going to be open to larger moves than usual.

Please make sure you have spoken with a member of the Aston team to put a plan in place to mitigate your currency risk.

Have a fantastic week

Written by Liam Alexander

ACM Update Monday 3rd June 2019

There are now more characters in the Conservative party leadership race than in the 1960’s Hanna-Barbera cartoon Wacky races. I will leave you to decide whom is Dastardly and Muttley out of the Prime Minister ‘hopefuls’.

This week, in addition to hearing why each of the Conservative Party candidates should be elected, we have the small matter of President Trump’s state visit to the UK. In his own unique and unorthodox style he has managed to enter the UK political and Brexit debate before he left Washington. Whether the UK pays too much attention to his commentary is another question. It’s safe to say that the UK has enough to focus on at present. However, I’m sure President Trump will continue to be predictably unpredictable so there may well be political fireworks this week at some stage.

Sterling/Dollar (Cable) fell to the lowest levels since January last week. I would expect any rebound and bounce to be limited due to the continuing painful and seemingly never ending political and Brexit uncertainties. We had Manufacturing PMI (May) out of the UK this morning that disappointed to the downside with a print of 49.4 against a consensus of 52.0.  Sterling was largely unmoved though on the release. There was a slight bounce in GBP/USD Friday with the Dollar being relatively subdued with a slump in US Treasury bond yields due to continuing fears of a global growth slowdown. However, this was limited. I don’t see much to drag the pair higher so I expect us to trade around these levels with a slight bias to the downside.

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

If you are holding USD and need to convert into GBP then I would suggest covering off some of your exposure at current levels. Might we drop lower? Yes. However, it was only a month or so ago that we were trading around the 1.32/1.33 level. Please contact the trading department for a rate of exchange. If you would like to structure a take profit order please speak with one of our trading team that can discuss technical levels with you.

Sterling/Euro -

We are now pushing to the lower end of the recent trading range. If you hold EUR I would take advantage of the recent moves and cover off some of your current exposure on SPOT. Please contact the trading department for a rate of exchange. On Thursday we have GDP (YoY) and (QoQ) (Q1) out of the Eurozone. Prints of 1.2% and 0.2% are expected. We also have the ECB interest rate decision and the ECB Monetary Policy statement and press conference. Should we see a sustained break through 1.13 the figure to the downside then this opens us up to further downside moves. The only saving grace for Sterling/Euro this week will be Italian political risks and what is said from the ECB President, Mario Draghi, around what it can do to combat risks on low inflation expectations and the ECB’s latest forecasts. I expect any upside in EUR to be limited.

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

It is sure to be an interesting week with President Trump in town and I believe he has already offended London’s Mayor before he stepped off the plane.

Have a fantastic week and any questions please let me know.

Written by Liam Alexander

ACM Update Monday 20th May 2019

A sign that the Europeans are getting bored with the UK and Brexit? We managed to finish last place in the Eurovision song contest. That is quite the achievement. Well done team. The term Eurovision is quite ironic really as the UK doesn’t seem to have one at present.

Sterling/Euro you could argue got even more of kicking than our Eurovision contestant did. We witnessed ten straight days of decline against the single currency. To put that in perspective, it’s the longest losing streak against the Euro since 1999. When the single currency was created. Good times for Sterling at the moment. With a Conservative ‘leadership’ battle on the horizon then one of two options could yet happen – a ‘Hard Brexit’ or Jeremy Corbyn as Prime Minister. If you haven’t guessed yet, that is Sterling negative. Tin hat time.

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

Where does Sterling/Euro go now? At present, I don’t see too much stopping it falling further. Will Theresa May get her deal through Parliament at the fourth attempt in June? Stranger things have happened although I don’t see it. If it doesn’t pass then the default position is the UK leaves the EU without a deal on 31st October. A public vote on the terms of the exit? Perhaps.

Over the summer months and really up to October Sterling moves are going to be dominated by politics. We do have inflation report hearings released from the UK tomorrow. This is followed by inflation data in the form of Consumer Price Index (YoY) (Apr) released on Wednesday. The expected print is 2.2%. From our European neighbours later in the week we have Preliminary Markit Manufacturing PMI (May) with an expected figure of 45.0 out of Germany. This is followed closely by Preliminary Eurozone Market PMI Composite (May) with a print of 51.8.

If you hold any Euros at present I would consider taking advantage of these moves on a SPOT basis back into Sterling. Please contact our trading department for a rate of exchange. There may be further downside so you might want to consider implementing market orders to take advantage of any further Sterling weakness. Please contact the trading department for technical levels to aim for.

On the other side, if you need to purchase EUR from GBP then you need to weigh up whether the rate is going to fall even further. Although the rate isn’t fantastic at present if you can achieve anything around 1.1350/1.14 then I would consider this as a starting point to work from. Again, please contact the trading department for a rate of exchange. Should we see any strengthening in Sterling then you can take advantage of this through market orders to the upside. Please contact me directly to discuss this in more detail.

Sterling/Dollar

Like the Manchester City juggernaut scoring six against Watford in the cup final on Saturday, the US Dollar continues to push Sterling lower and lower. Cable (Sterling/Dollar) has fallen below the February low of 1.2772. Could Sterling trade below 1.25 once Theresa May resigns? Absolutely. From there, does that open the door to hitting the psychological level of 1.20 the figure? It is now a possibility dependent on whom emerges from the Conservative leadership contest as that may spark a general election or the UK falling out of Europe without a deal. Good times.

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

If you are selling USD/GBP fill you boots at current levels. Might we head lower? Yes. However, I would suggest taking advantage of these recent moves. Should we see any intraday moves lower then try and take advantage of them with some take profit orders at staggered levels to the downside. Please contact the trading department for a rate of exchange. There isn’t much data out of the US this week with the FOMC minutes on Wednesday the only release of note. Trade concerns linger so the dollar may be in consolidatory mode going into the minutes.

If you need to purchase USD from Sterling then it really is a question of giving yourself a price point to work from. Is the rate fantastic at present? No. However, as detailed above, there are risks that we could fall further still. You should consider taking some risk off the table and execute a portion of your exposure on a SPOT contract at current rates. We can then look at implementing market orders to the upside to take advantage of any spikes in the rate. If you let us know your timeline and individual requirements we can put a plan in place to mitigate any downside risks whilst providing some room to take advantage of any upside moves in your favour.

Sterling is likely to be a prisoner to Brexit for most of the summer so please do get in touch to discuss your requirements.

Have a fantastic week.

Written by Liam Alexander

ACM Update Monday 13th May 2019

The US-China trade tensions continue. The US imposed further tariffs on Chinese goods on Friday. Any further escalation in a trade war between the two largest economies in the world won’t do much to help with global economic growth. Couple this with ongoing cross party talks in the UK that will likely reach an insurmountable impasse in the coming days and it could be a long summer. Longer than Ole Gunnar Solskjaer’s? Perhaps not.

Sterling this morning has been as flat as the atmosphere at Old Trafford yesterday. Sterling is trading sideways at the moment. Cable (Sterling/Dollar) is trading around 1.30 the figure without any clear indication on a break lower or higher. You can view the recent movements on the graph below -

The main drivers around Sterling this week will continue, as always, around politics. We do have the ILO Unemployment rate (3M) March released tomorrow. A print of 3.9% is expected. This may give Sterling a shot in the arm if we see a number above expectations. I expect Sterling/Dollar to continue to trade in the 1.29-1.33 range for the foreseeable future. Once we have some kind of resolution on the UK’s next steps around Brexit then this may give us some clarity. If you are holding USD I would consider executing some on SPOT into GBP at current levels. I would also look to stagger some take profit orders to the downside to take advantage on any further falls in Cable (GBP/USD). Try and average up your exchange rate through market orders. Please contact the trading department to discuss technical levels to aim for.

If you need to purchase USD from Sterling consider a stop loss to protect against any adverse movements over the summer months. Consider this as a ‘worst case scenario’ level. I would also couple this with take profit orders to the upside to take advantage of any Dollar weakness. Again, please contact the trading department to discuss resistance levels we will need to break through on the upside. There is very little data out from the US this week so we are likely to see some range bound trading.

On Sterling/Euro we are trading under 1.16 the figure. If you are selling EUR consider taking advantage of the recent retracement on GBP/EUR. In terms of data, we have the ZEW survey released from Germany tomorrow. On Wednesday we have preliminary GDP (QoQ) (Q1) out of Germany with a print of 0.3% expected. The (YoY) ((Q1) figure is expected to come in at 0.7%.

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

If you are purchasing EUR from GBP I would look at implementing a market order at 1.16 the figure. Please contact the trading department to place an order. Whilst I don’t expect Sterling to rally massively this week there may well be a small move to the upside that takes us back to that level.

Please get in touch with me directly to discuss your upcoming requirements. Please do consider Forward Contracts to protect yourself against any adverse moves.

 Have a fantastic week.

 Written by Liam Alexander

ACM Update Wednesday 8th May 2019

Sterling is up on last week, the sun is shining and everyone in the UK is back from the May Bank holiday. The mystery and resolution of ‘Brexit’ is akin to the mystery of why the Kardashians are relevant. Who knows. Brexit will continue its domination of all things politics after the recent embarrassment for the major UK parties in local elections.

The macro calendar this week is extremely light so expect movements in currencies to be driven by commentary and political statements rather than any fundamental moves on data. We have industrial production data out of Germany/France/Italy and then the ECB President, Mario Draghi, speaking on Wednesday. From a UK perspective we have Preliminary GDP (QoQ) (Q1) on Friday.

Where is the next move on Cable (Sterling/Dollar)?

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

We have moved from around a little over 1.29 last week to open this morning at 1.3124. We have given up some of those gains and have traded back below 1.31 the figure . If you have a requirement to purchase USD from GBP I would consider locking in some of your exposure at current levels to take advantage of the recent moves. We would need to see a break through 1.3217 (25th January high) to open up any meaningful sustained move to the upside. Please contact our trading department for a rate of exchange on SPOT and to discuss technical levels around any take profit orders.

On Sterling/Euro we had been in a bit of a malaise recently and not really moving from the mid-1.15s. We had a nice spike higher on Friday as you can view on the graph below –

If you have requirements to purchase EUR from GBP consider taking advantage of the recent move higher. Please contact our trading department for a SPOT rate. EUR/USD has shifted back below 1.12 the figure so should we see a further fall then this may give Sterling/Euro some further impetus to move higher. Consider implementing a market order around 1.17 the figure should we see a sustained break higher on Sterling. Again, please contact our trading department to implement this.

As mentioned earlier, it’s a relatively quiet week on the currency markets although these things can change remarkably quickly. We might even see some progress on a Brexit deal this week!

If you have any questions please do let me know.

Have a great week.

Written by Liam Alexander

ACM Update Monday 15th April 2019

Tiger Woods won the Masters yesterday. His first major in 11 years. The way Brexit is going, the timeframe might be similar. A summer of inevitable political discontent awaits. Joy.

Now the can has been volleyed rather than just kicked down the road Sterling should maintain a neutral to positive bias over the coming months.

Sterling/Dollar

We have settled above 1.30 the figure and there looks like strong support at this level. If you have a requirement to purchase USD from GBP consider covering off some on a SPOT basis at current levels. In addition, stagger take profit orders to the upside to take advantage of any intraday moves on any market fundamentals.

You can view the movements on the graph below –

There is a fair amount of data out from the UK and the US this week. We have the ILO Unemployment rate (3M) (Feb) released tomorrow with expectations for a print of 3.9%. We also have Average Earnings Excluding Bonus (3Mo/Yr) (Feb) released with a print of 3.4% expected. On Wednesday we have inflation data released in the form of CPI (YoY) (Mar) with expectations of a figure of 1.6% against a previous print of 1.9%. In terms of US releases, the main release this week is in the form of Retail Sales. If you have any USD/GBP exposure to cover off prior to Easter please get in touch with our trading department to discuss specific levels and rates.

Sterling/Euro

If you have a requirement to sell EUR into GBP I would look to cover off some at current levels. It gives you a price point to work from. EUR/USD has moved through 1.13 the figure so this has helped move GBP/EUR lower. The UK fundamentals, on balance, have held up pretty well in spite of two years of chaos and uncertainty. I do expect Sterling/Euro to climb higher this year although every forecast now has to be caveated by Brexit. More Brexit delay will have a negative impact on the UK. This is stating the obvious. In spite of everything, Sterling hasn’t crumbled under the pressure.

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

If you have a requirement to purchase EUR from GBP I would look at take profit orders at 1.16 the figure this week as a target level. Please contact the trading department to implement an order.

In terms of data this week that will impact the direction of the Euro it is fairly limited. We have the ZEW (sentiment) survey out of Germany and Markit PMI composite (Apr) (Preliminary) out of the Eurozone. Other than that, it will likely be commentary from EU officials and politicians that will drive Euro weakness or strength.

If you have any questions please do let me know.

Have a fantastic week

Written by Liam Alexander

ACM FX Update 08/04/19

Odd’s on the UK not leaving the EU on the 12th April? Tiger roll in the Grand National at the weekend had about the same odds. Will the EU then agree to the June extension that has already been requested or will they insist on a much longer extension? Theresa May had a ‘fireside chat’ with the nation explaining her decision to negotiate with the Labour Party at the weekend. I didn’t see a fire but there we go. How will the Prime Minister’s talks go with the Labour Party this week and will they agree a compromise deal by Wednesday before Theresa May heads to Brussels for a summit? Your guess is as good as mine.

 We are coming to the final stages of Brexit I feel one way or the other. Clarity has to be provided at some point. Cable (Sterling/Dollar) has largely still been trading in its recent range with a move last week up to just below 1.32 the figure. We are trading back around 1.3050 in Monday’s trading session.

 You can view the movements last week on the graph below

 Sterling/Dollar has had a slight bounce higher this morning with the Dollar weakening due to geopolitical tensions in Libya pushing market participants into the Yen and Gold. Sterling is very much still to awake after a heavy weekend at the races it seems. I’d expect Sterling to trade this week again on commentary rather than any fundamentals. We have FOMC minutes out of the US on Wednesday although that is the main release from our cousins across the pond this week. We’re relatively light on the data front.

 As I’m sure you’re thoroughly bored of me saying please make sure you have a plan in place around your FX exposures, especially this month. Whilst all may seem relatively calm and rather dull at present, in this environment it takes one major event to move Sterling percentage points against you. Please contact our trading department to discuss a strategy and technical levels.

On the Sterling/Euro front, we are trading in no mans land at present. If you need to purchase EUR from Sterling I would look at anything at 1.1650 and above as a good level to aim for on a SPOT basis. Please contact our trading department to implement a take profit order at that level should we have a move back higher in Sterling/Euro in the upcoming trading sessions.

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

 This week is relatively light on the data front with the ECB Interest/deposit rate decisions and the ECB Monetary Policy statement and Press Conference on Wednesday this week the main points of note from a EUR perspective.

 Of course, both Cable (Sterling/Dollar) and Sterling/Euro will largely be impacted by Brexit news flow and the likelihood, or not, of a workable solution that the UK can go to the EU with.

 Another week of uncertainty is upon us. Please do get in touch to discuss your individual currency requirements and we’ll help you put a plan in place to mitigate your currency risk.

 Have a great week.

 Written by Liam Alexander

ACM Newsletter 01/04/2019

At least the clocks went forward this weekend. The Brexit process – not so much. We have less than two weeks before we are due to leave. Today a raft of options will be tabled followed by a debate then votes on the options will be held later this evening. Sounds familiar. Will there ever be a majority for the way forward or will have Theresa May’s deal through at the fourth time of asking or will we leave without a deal? We’ll know in the next 12 days. Perhaps.

Sterling has become almost immune to the ebbs and flow of Brexit news. Cable (Sterling/Dollar) has traded from around 1.30-1.33 and Sterling/Euro from around 1.1550-1.1750 recently. However, Sterling may soon either trade significantly lower or significantly higher. If none of the options being voted on this evening get a majority then expect Sterling, technically speaking, to get a good kicking. We may see it fall a few percentage points this evening or rally higher. If our politicians cannot agree on one of the endless options being tabled then the Prime Minister will go again for the fourth time of asking and say “Well, if you can’t agree on anything then it’s either my deal or it’s no deal”. Again, this is all speculative. Sadly, no-one really knows how this is going to end.

The one thing you can guarantee is that if April 12th is the day we are going to leave then Sterling is going to react more aggressively in the next 10 trading sessions.

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

GBP/USD GRAPH

GBP/EUR GRAPH

If you have a requirement to purchase USD from Sterling then consider purchasing a percentage of your overall exposure on SPOT or a short dated Forward Contract out till end of April. It gives you some downside protection should the UK leave without a deal. Please contact the trading department for rates of exchange and to discuss margin requirements over the next few weeks. Also, consider implementing take profit orders to take advantage of any upside moves on commentary.

If you need to sell Dollars consider staggering take profit orders to the downside to take advantage of any intraday movements or any sustained directional move on the back of Brexit related news. Please contact the trading department to discuss levels. In terms of news flow for USD this week, ISM Non-Manufacturing (PMI) (Mar) and Non-farm Payrolls (Mar) are the key releases.

In terms of Sterling/Euro, we’re trading in no-mans land at present with a neutral bias. We’re extremely light on Eurozone data releases this week although of course Brexit commentary from European officials will impact GBP/EUR. If you would like to discuss a strategy for your individual requirements for GBP/EUR over the coming weeks please do get in touch with our trading department. They will be able to provide you with expected technical levels and work out a plan that works best for you and ultimately mitigates your currency risk.

If you have any questions on anything please do let me know.

Have a fantastic week.

Written by Liam Alexander

ACM Update 18th March 2019

Theresa May, like a raft in the Caspian sea looking for land, has a few days to get there. Land being the third meaningful vote. Will she get the support of the DUP (Democratic Unionist Party) and will that translate to some Brexiters switching their vote (the magic number is 75) in support of the PM’s deal? Time, a diminishing commodity for the Prime Minister, will tell.

What is almost certain now is that the UK won’t be leaving the EU on 29th March. Roll on more uncertainty. Will we ever leave the EU? We can live in hope we’ll have some clarity at some stage as this is becoming the longest running dark comedy ever aired.

Sterling has been buoyed with the threat of No deal being taken off the table. You can view the moves on Cable (Sterling/Dollar) on the graph below –

GBP/USD - 1 Week

The top of the market has been around 1.33 the figure although we have drifted off in the European session to around 1.3250. If you have any USD requirements from Sterling I would suggest covering off at current levels. If you would like a SPOT rate please contact the trading department for a rate of exchange.

This week, in addition to the never-ending political noise, is a busy week on the data front. We have the UK ILO Unemployment Rate (3M) (Jan) out on Tuesday followed by Average Earnings Excluding Bonus (3 Mo/Yr) (Jan). On Wednesday we have inflation data out in the form of Consumer Price Index (YoY) (Feb) followed by the Fed’s Monetary Policy Statement/Interest rate decision/Press conference. We have the small matter of the UK Parliamentary Vote that day too. On Thursday we have the Bank of England Interest rate decision which is likely to be a non-event.

If Theresa May manages to somehow get her deal through then Sterling should rally higher, perhaps significantly. Consider implementing take profit orders to take advantage of any spikes in the market over the coming weeks. Please contact the trading department to discuss technical levels.

In terms of GBP/EUR, we rallied to just under 1.1750 although we have since given up some of those gains.

You can view some of the recent movements on the graph below –

GBP/EUR - 1 Week

If you need to purchase EUR from Sterling take advantage of the recent moves in your favour. Please contact the trading department for both SPOT and Forward rates. Might Sterling/Euro push higher still? Quite possibly. Consider implementing take profit orders to the upside to take advantage of any significant intraday movements in your favour. Again, please contact the trading department to discuss technical levels. Selling EUR/GBP? Evidently it’s not the best time to do so although consider implementing take profit orders should we see more uncertainty and mudslinging around UK politics that may impact the direction on Sterling.

It is worthwhile discussing your current positions and Q2 exposure with us as levels may be markedly different in a few weeks’ time. Feel free to contact me directly to discuss.

Have a fantastic week.

Written by Liam Alexander

ACM Update Monday 11th March 2019

Is this the week we finally get some clarity around Brexit? I’d be amazed.

Will Theresa May win Tuesday’s meaningful commons vote? Unlikely. After that, there will be a vote on leaving without a deal. Once that is concluded/fails, there’ll be a vote on delaying the exit date. Clear as mud I’m sure you’ll agree. I’d expect a delay/extension to the exit date. This can then be put to the EU. However, it doesn’t necessarily mean the EU has to accept our offer. Whilst I’m sure they will, if they didn’t, that would be the final cherry on top of this fiasco.

What is all this uncertainty doing to Sterling? It is shifting GBP out of some recent ranges. Cable (Sterling/Dollar) is currently trading around the mid of the past month’s range. We hit the dizzy heights of 1.3339 whilst the low has been 1.2781. The dollar has had some recent strength as investors look to it as a safe haven with global growth concerns back on the table. Couple this with the never ending Brexit chaos and Sterling/Dollar may trade back to lower levels.

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

GBP/USD - 1 Week

Is the Dollar particularly attractive at present? Not really. It is the case of the ugly parade between the Dollar, Euro and Sterling. US employment growth was pretty much non-existent in February although the employment rate was back under 4% and average hourly earnings were up. This makes the Dollar slightly less ugly than going into Sterling with all the Brexit chaos at present. In addition, the Euro has been hit with EUR/USD trading around the 1.1250 mark, down to some of its lowest levels since the middle of 2017. On Thursday last week the ECB (European Central Bank) downgraded the growth outlook. I’d expect the dollar to make some further gains against Sterling this week.

If you are holding USD I would take advantage of some of the recent moves and convert a percentage on a SPOT basis against GBP and EUR if you have requirements. Please contact the trading department for a rate of exchange. In addition, with a week of UK politics likely to take up most of the headlines Sterling may find itself under pressure. Consider utilising take profit orders on USD/GBP. Please contact the trading department to discuss technical levels.

If you have a requirement to purchase US Dollars from Sterling by the end of the March you need to consider some worse case scenarios. If there is a disorderly Brexit then Cable (GBP/USD) could fall to 1.20 the figure. Whilst I think that is unlikely it is still a possibility. Please make sure you have had a discussion with me or the trading department to put a plan in place to mitigate some of this risk.

Brexit will of course take centre stage (again) although I think most people have forgotten there is the small matter of the ‘Spring Statement’ and mini-budget on Wednesday. Whilst it isn’t as significant as the main budget, now scheduled in November, it will still be keenly watched. Across the pond we have Retail Sales (MoM) (Jan) out of the US this afternoon followed by inflation data in the form of CPI (YoY) (Feb) on Wednesday.

Sterling/Euro

Over the past month we have traded between a little over 1.13 to a little over 1.17 on GBP/EUR. With reports over the weekend focusing on the UK parliamentary votes Sterling has been sold off. We are down around 0.5% against EUR in today’s trading. Will people start to get out of Sterling positions now the end of March is in view? Quite possibly. Sterling may be in for some short-term pain this week so if you are holding EUR consider some market orders back to GBP to take advantage of any intraday moves in your favour. Please contact the trading department to discuss levels to aim for.

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

GBP/EUR - 1 Week

I expect a slight retracement on Sterling/Euro as I think we’re going to struggle to hold above 1.15 the figure this week. With political indecision and general reluctance to hold Sterling positions going into the end of March I think we’ll see Sterling move to the downside. If you have a requirement to purchase EUR from GBP then please consider locking in some of your exposure at current levels on a SPOT basis and discuss Forward Contracts with our trading department. This will allow you to mitigate some of your currency risk in the run up to the end of this month and the inevitable uncertainty that the 29th March will bring.

In terms of data around Sterling and Euro this week it is relatively light. We have some manufacturing data out of the UK on Tuesday in addition to GDP (MoM) (Jan) that is expected to print at 0.2%. On Thursday we have inflation data out of Germany with Eurozone inflation data rounding off the week on Friday.

If you have any questions around your currency requirements please get in touch directly.

Have a fantastic week.

Written by Liam Alexander

ACM Update Monday 28th January 2019

Last week Sterling soared against the Euro and US Dollar with a no-deal exit looking less likely. Will this uptrend continue or will there be a retracement in Sterling with the key UK parliamentary vote on Brexit ‘Plan B’ this week?

Sterling/Dollar

Cable (GBP/USD) briefly traded above the 1.32 handle on the back of a resurgent Sterling and a US Dollar sell off prompted by the potential of the Fed’s balance sheet normalisation happening sooner than expected. Some of the gains have been given up with some profit taking after the large moves higher last week.

You can view the moves in Sterling/Dollar last week on the graph below –

GBP/USD - 1 Week

Will Sterling/Dollar have another push higher or will see a downside move this week? We have the Bank of England Governor, Mark Carney, speaking today followed by the Federal Reserve’s monthly policy statement and interest rate decision on Wednesday. On Friday, we have the NFP (Non-Farm) payroll figure released with a print of 168K expected. Tomorrow, from a GBP perspective, the Parliamentary vote on Brexit Plan B is going to be a key short-term driver. If the UK secure any amendments to the backstop then this may assist the Prime Minister in getting her Brexit deal through Parliament. This would give Sterling a shot in the arm and push it higher. However, weekend reports suggest the Irish deputy PM ruling this out. Another week closer to ‘Brexit Day’ and things are still as clear as mud.

If you have a requirement to purchase USD this week take advantage of the recent moves on SPOT. Alongside this do consider implementing take profit orders ahead of tomorrow’s vote. Please contact the trading department to implement these and discuss technical levels.

If you’re selling USD back to GBP you have to protect against any further moves higher in Sterling. At present, historically, rates are still at attractive levels to go back into GBP. Please contact the trading department to discuss a strategy to give you some upside potential whilst protecting against any adverse moves.

Sterling/Euro

Well well well. Finally, we’ve broken out of a tight trading range. Sterling/Euro has ascended to the dizzying heights of above 1.15 the figure. You can view the recent movements on the graph below –

GBP/EUR - 1 Week

If you have a requirement to purchase EUR I would suggest covering off some on SPOT to take advantage of the recent gains. In addition, there may well be more upside in GBP/EUR so consider implementing take profit orders at staggered levels. In terms of specific technical levels to aim for please contact the trading department.

As always, Brexit and the specifics of how we exit the EU will largely determine the direction in GBP/EUR for the foreseeable future. With the March deadline fast approaching you may see heightened volatility in this currency pair. Please make sure you have a strategy in place to take advantage of moves in your favour whilst protecting downside risk. In addition to the UK parliamentary vote tomorrow we have GDP (QoQ) (Q4) and (YoY) (Q4) out of the Eurozone on Thursday. Expectations are for prints of 0.2% and 1.2% respectively. The ECB president, Mario Draghi, is likely to remain balanced on a variety of topics. However, with slower growth being more evident there may be a slight dovish leaning. Draghi is speaking in the European parliament later today although I don’t expect anything new from him on rate hikes.

If you have any Sterling exposure please do get in touch with us. The markets are likely to be more volatile in the coming weeks so make sure you have a plan in place around your currency requirements

Have a fantastic week.

Written by Liam Alexander

ACM Update Monday 21st January 2019

he next total lunar eclipse in 2021 may arrive quicker than Brexit. Will Brexit happen? Will there be an extension to Article 50? Will there be a resolution on the Irish backstop? Productive cross-party talks seem as likely as agreement between the Democrats and the Trump administration on the border wall. So, what happens next?

Theresa May goes back to Parliament and makes a statement to the House of Commons today. Cue more merry debate. At present, some kind of extension to the Brexit process is looking like the option that will come to pass. However, no doubt as soon as I’ve finished writing this sentence there will be another development.

What is happening to Sterling? To massively simplify things if an extension to Brexit looks more likely Sterling trades higher. If No deal looks more likely then Sterling falls. Expect Sterling to react more dramatically in the coming weeks to news flow as we hurtle towards end of March.

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

GBP/USD - 1 Week

GBP/EUR - 1 Week

 Sterling/Dollar

Sterling/Dollar climbed higher last week although is trading slightly to the downside at the start of this week. If you have a requirement to purchase USD from GBP consider taking some risk off the table by covering some on a SPOT basis at current levels. In addition, dependent on how Brexit negotiations progress Sterling may have a sharp rally higher. Whilst I don’t think we’ll hit 1.30 the figure in the next few trading sessions there is a chance we push through this level again. Please get in touch with the trading department to implement take profit orders at 1.30.

Whilst UK politics, as ever, will be the main driver for Sterling, we have Average Earnings (3Mo/Yr) (Jan) and also the ILO Unemployment rate (3M) (Jan) out of the UK on Tuesday. Prints of 3.3% and 4.1% are expected respectively. If any of these figures disappoint to the downside then we may see a fall in Sterling. If you are holding US Dollars then consider placing take profit orders to the downside around 1.28 the figure. Please contact the trading department to implement orders and to discuss further technical levels.

Sterling/Euro

We are trading around the middle of the range over the past 12 months. We hit the dizzy heights of around 1.1580 back in April ’18 and have traded as low as just under 1.10 the figure.

We have the ECB Interest rate and Deposit rate decision out on Thursday followed by the ECB press conference. This will likely be a non-event so we shouldn’t see too much movement in the single currency. If you have a requirement to purchase EUR from GBP I would look at current levels as being relatively attractive. Might we push higher? Absolutely. However, the downside risks around Sterling are numerous. Feel free to get in touch with the trading department for a SPOT rate. Should we see some miraculous agreement surrounding Brexit then Sterling may shift higher by percentage points. Please get in touch to discuss technical levels to aim for and implement orders at levels that may hit in the coming weeks.

Selling EUR back to GBP? As I’ve said before, historically, you’re at good levels to sell back into GBP so do take advantage of this. Yes, there may be more movement in your favour although if you look on a 5 year basis then we were trading above 1.40 the figure. Please get in touch directly if you would like to discuss your individual requirements with me.

Have a fantastic week and any questions please let me know.

Written by Liam Alexander

ACM Update Monday 7th January 2019

January 15th. The next big date in the diary. Nope, not when the New Year Avocado and Kale salad with a sprinkling of pine nuts, washed down with Kombucha tea comes crashing down to the inevitable conclusion. It’s a Parliamentary vote on Theresa May’s Brexit deal.

Like a wheezing middle aged gym goer pounding the treadmill in January, the UK is coughing and spluttering towards the end goal of Brexit. We can make as many predictions around what will happen end of March as we like, although frankly, no-one has an answer.

What we can look at is the direction of Sterling in the run up to March.

If you look at the graphs below you can view the movements in Cable (Sterling/Dollar) and Sterling/Euro in the first week of 2019 -

GBP/USD - 1 Week

GBP/EUR - 1 Week

As you can see Sterling has suffered a few sharp downside moves although has recovered in recent trade against both USD and EUR. Expect ebbs and flows to continue through Sterling in Q1’19. After the end of March? All scenarios are on the table. If there is a ‘Hard Brexit?’ Sterling could potentially fall to and through the 1985 low of 1.07 against the Dollar. Do I expect this to happen? No. However, if you are a USD buyer from GBP I would consider locking in some of your Q1 and Q2 exposure at current levels to protect yourself. Consider implementing either a SPOT transaction or discuss Forward Contracts and margin considerations with our trading department.

As above, if you need to hedge downside moves in GBP against EUR do consider implementing a Forward Contract. This provides you protection should the end of days as some sensationalist headlines suggest occur. Might rates move in your favour over the coming weeks/months if the risk of a ‘No deal’ Brexit becomes less likely? Absolutely. Therefore, in addition to Forward Contracts consider the other side of the trade and implement take profit orders to the upside to take advantage should we see a change in sentiment. Please contact the trading department to discuss technical levels.

If you are a seller of USD and EUR against Sterling then fill your boots at current levels. Historically, we’re at attractive levels. If you would like a SPOT price please let myself or the trading team know. If you think there is further to run to the downside then look at staggering take profit orders. Again, please contact my trading department directly to discuss your own specific requirements.

We had a strong NFP (Non-Farm Payroll) figure out of the US on Friday with a print of +312K for December. This shows the US economy is in a strong position although of course trade tensions with China remain as well as concerns around global growth. The key question for the Federal Reserve and Mr Powell (Fed Chairman) this year will centre around interest rate rises. Will there be two or three rate rises and can the US economy handle this? The Fed Chairman believes the data and thinks so. The man with the yellow hair in the White House not so much. Expect more news coverage around this and no doubt a media fallout.

Should we see a combination of a stronger Dollar coupled with an under pressure UK pound in Q1’19 then we could potentially test a strong support level of 1.20 on GBP/USD. Please make sure you have discussed a strategy with our team to make sure you’re protected whilst allowing yourself upside potential.

What do we have out this week? It’s a relatively light week on the data front although we have the Bank of England Governor, Mark Carney, speaking on Wednesday. We also have the FOMC (Federal Open Market Committee) minutes out that day from the US too. On Thursday we have the ECB (European Central Bank) monetary policy meeting accounts and then the Fed Chairman, Jerome Powell, will speak in the evening (UK time). Rounding off the week on Friday we have GDP (MoM) (Nov) out of the UK. A print of 0.1% is expected.

Whilst there is always movements in currency markets the run up to the end of March and ‘Brexit day’ could prove extremely volatile. Levels we haven’t seen for a long time, if ever, may materialise. Please make sure you have a conversation with us to discuss your requirements for Q1 and Q2 ’19 and put a plan in place to mitigate your currency risk.

If you have any questions please do let me know.

Have a fantastic week and enjoy the gym!

Written by Liam Alexander

ACM Update Monday 22nd October 2018

Apparently the Brexit withdrawal agreement is 95% complete. Hmmm. I wouldn’t bet the UK’s future on it. Oh wait, we are.

Sterling/Dollar

This week will be shaped by politics and headlines from the UK Government. Sterling took a hit last week with Cable (Sterling/Dollar) falling to just above 1.30 the figure. This was due to poor macroeconomic data from the UK and the failure at the European Council meeting to make the progress the market expected. Sterling has since had a slight recovery although is trading under 1.31 the figure.

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

GBP/USD - 1 Week

This week is relatively light data and event wise. We have the Bank of England Governor, Mark Carney, speaking on Tuesday and we have US GDP (Q3) Preliminary figures released on Thursday. This should give us a better handle on the direction for GBP/USD short-term. However, as we all know, trading Sterling is largely now subject to politics and Brexit. The UK Prime Minister, Theresa May, is in Parliament today and will inform politicians that the withdrawal agreement is almost complete. This should be interesting. Will Theresa May be able to deliver Brexit or will she be given her P45 before then? The fact we even have to discuss this is concerning. Sterling is going to be under pressure for the remainder of Q4. We will have some short-term spikes on GBP positive news so please make sure you are in a position to take advantage of these.

If you can achieve 1.30 or above to purchase USD from GBP I would suggest that is a level worth considering.

If you would like to discuss your upcoming requirements please contact me directly.

Sterling/Euro

Similar to the above, Sterling has fallen around a figure from 1.1425 to 1.1325 on GBP/EUR. If you have a requirement to sell EUR/GBP please consider placing orders at 1.13 the figure. I expect some further Sterling weakness to come into play so try and take advantage of moves in your favour. As we’ve said for a while, the trading range on Sterling/Euro is from around 1.11 to 1.14. We broke slightly higher than 1.14 last week so if we see that move again please make sure you take advantage. Please discuss with the trading department technical levels to aim for.

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

GBP/USD - 1 Week

On the Euro front this week, the main event is the ECB meeting and press conference. Italian Government risks will weigh on the Euro. It’s investment grade rating will be reviewed by S&P on Friday. Where do we expect GBP/EUR to go? I expect a mixture of Sterling and Euro weakness this week that will ultimately mean the pair trades in a range. However, with most of the Brexit debate being centred in the UK we expect downside risks for Sterling. Please make sure you have a suitable hedging strategy in place.

If you have any questions please do let me know.

Have a great week.

Written by Liam Alexander