Will GBP continue to rise against the US Dollar and the Euro? Or will the recent rally be as short lived as a ‘YouTube sensation’ and a ‘Vlogger’s’ importance, to, well, anything?
The continued downtrend on Sterling seems to have eased for the time being. We had a significant shift higher on both GBP/USD and GBP/EUR last week. Will GBP maintain the momentum or will we run out of steam? On Cable (GBP/USD) we will need to see a sustained break above 1.45 the figure to change my bearish outlook on Sterling over the next 5 weeks prior to the EU referendum. I believe we will remain in the EU as the electorate will go with the status quo. It may not even be a close run thing. The closer we get to the referendum I think you’ll see polls dramatically in favour of a ‘remain’. Of course, I could be completely wrong. What do I think the polls will do to Sterling? I think there will be some short-term noise and Sterling could lose some of its value prior to June, hence my forecast that we will push lower although once/if we remain in the UK we’ll see a bounce in Sterling. I don’t think it’s going to be as significant as some commentators suggest and it will likely be a 2-3% move higher. Once the dust settles? I think Sterling will be on the back foot again as the fundamentals, current account deficit etc etc are still far from ideal. If we look at the graph below you can see the move higher in GBP/USD last week. If you have a requirement to convert USD back into GBP before end of month please do consider converting them as soon as possible as we are pushing back up. Alternatively, should you think GBP/USD is going to give up some of its gains then please get in touch and we can discuss appropriate and realistic levels to aim for through implementing market orders.
The ECB meeting last week was a non-event. The deposit rate, interest rate on its refinancing operations and its marginal lending facility were unchanged. Draghi’s press conference gave us as much new worthwhile information as one of those ‘Youtube sensations’ I mentioned earlier. Zero. GBP/EUR will likely move up, down, left, right with a few somersaults thrown in prior to June. With Greece getting back into the news for all the wrong reasons the EUR may come under further pressure. I really don’t think I can handle ‘Greece the crisis, part dio’ so hopefully things get resolved on debt repayments. Short-term, we will probably trade in a range on GBP/EUR with a slight bias to the upside. I think we have had the substantial move higher on GBP/EUR last week. If you look at the graph below you can see the move higher. If you are a EUR seller please do consider locking in a large portion of your Euro’s back into Sterling before we push back above 1.30 the figure. Please contact myself or one of the trading team to implement a SPOT transaction. If you are a Euro buyer I would consider locking in some of your GBP into Euro at current levels on a SPOT basis whilst placing a market order to the upside to take advantage of any intraday moves in your favour. We have inflation and growth numbers out of the Eurozone this week so any moves on GBP/EUR are likely to be Euro led with Sterling swept in either direction on the back of it.
If you have any upcoming requirements please let me know.
Have a fantastic week and any questions feel free to get in touch.
Written by Liam Alexander