David Cameron’s ongoing tax affairs, Tata Steel, dwindling labour productivity, slowing economic expansion, continuing ‘Brexit’ concerns, and likely non-event at the Bank of England this week? Sterling is likely to fall faster than Eddie the Eagle on a ski slope.
Sterling started last week trading above 1.43 the figure on GBP/USD and 1.25 the figure on GBP/EUR last week. We ended the trading week lower at 1.4150 and 1.2350 respectively as can be seen from the graphs below –
Overnight in the Asian market Sterling advanced to 1.4226 against the dollar although the pair quickly retreated back below 1.42 the figure, as selling at higher levels is still seen as the preferred trade in the pair. We are now looking for some short-term direction as we’re flirting with both sides of 1.42 on an intraday basis. Do you have a requirement to convert USD back to GBP? If so, please do consider converting a portion of your Dollars at current levels. Might it go lower? Quite possibly, although I would suggest anything under 1.45 is extremely good value. Please contact myself or a member of the trading team to discuss your requirements. Should you think we’re in for another move lower then we can discuss implementing market orders for you to the downside at appropriate levels.
If you are a USD buyer then I would suggest being risk averse. You are above 1.40 to purchase US Dollars. Yes, the rate isn’t fantastic although I do expect us to have another go at the psychological level of 1.40 again. We have Retail Sales out of the US on Wednesday so this may strengthen USD further. With ‘Brexit’ noise likely to intensify with the official start of the campaign this Friday Sterling is going to be thrown around as much as a company directorship in Panama. Please discuss a strategy with us to mitigate your currency risk over the coming 6 weeks. Yes, a lot of the Sterling downside has been priced in already although it only takes a few opinion polls to push us further south.
On GBP/EUR It may be a case of an ugly parade this week between Sterling and the Euro to see who wins. Dependent on whom has been eating the least Mars bars will determine the victor. We have inflation data (CPI) out of the UK tomorrow followed by Inflation data out of the Eurozone on Thursday. Eurozone data is expected to come in worse than expectations so we may see a pullback on the Euro. This week will give us a better indication of short term direction on GBP/EUR as the market is in two minds on whether we should sit above or below 1.25 the figure. If you need to convert EUR back to GBP consider converting some on SPOT and then implement market orders to the downside to take advantage of any further Sterling weakness. If you are buying Euro’s then it may need to be a readjustment of what you consider ‘fair value’. The pop act ‘Jedward’ were around as long as we were above 1.40. If you think we are going to move higher on GBP/EUR then please discuss implementing market orders whilst covering some of your exposure on a SPOT basis. Contact a member of the Aston trading team and we’ll discuss a strategy with you.
If you have any questions please do let me know.
Have a fantastic week.
Written by Liam Alexander