Easter is at an end and with it travel chaos and Storm Katie. If anyone had the pleasure of being in a carriage listening to members of the great British public uttering the words "My train is delayed", "my train arrives at 5.30" "my train is delayed" over and over and over and over then the argument for remaining in the EU becomes stronger still. After that journey I'm all for greater unity with our European cousins compared to being isolated with members of carriage B for the rest of eternity.
With Spring looking like it might arrive on the 5th of Never what do we have to brighten the outlook for this week? With Q1 coming to an end attention is this week focused on the US with the release of Non Farm Payrolls, the unemployment rate and ISM manufacturing data. Have you put a plan in place for your currency management for Q2?
We have had a lot of volatility since January with GBP/USD being the main victim and Sterling on the back foot for most of Q1. What do we expect for the next three months? Volatility will likely increase in the run up to the EU referendum so if anything the next few months are likely to provide us with exaggerated moves. Do you convert GBP into USD? If you can achieve above 1.40 I would consider locking in some at these levels on SPOT or on a Forward contract out till end of June. It may be prudent to do so as I think Sterling is going to come under increased pressure in the coming months. To this end, if you are a USD seller look to implement market orders around 1.42 and 1.41 in upcoming trade. We've failed a few times at levels just under 1.41 so this will give you the greatest likelihood of achieving your level. Will it go under 1.40? I think we'll challenge 1.35 before June.
If you look at the GBP/USD graph from last week you can see we're trading in a range between 1.40 and 1.45 at present.
Please contact a member of the Aston team to discuss a strategy for the next few months.
GBP/EUR is treading water at present with no sustained shift in either direction. It is debating whether to head to 1.25 or flirt with 1.30 again. As I've said previously unless we see a sustained break higher above 1.30 then I see further downside for GBP/EUR. I expect us to break the 1.25 figure in the coming month. Could it possibly go as low or even through 1.20 prior to June 23rd? Quite possibly. I would suggest being even more risk averse over the coming months as any polls/comments will weigh on Sterling. Again, please do get in contact with myself or a member of the Aston team to start planning your Q2 currency management.
Next week we'll have some clearer insight into how things are going to shape up for Q2. We'll write our projections for levels for Q2 next week and give an in depth look for the next three months. In addition to the US data this week we have inflation data released from Germany tomorrow followed by employment data from Germany on Thursday, CPI data from the Eurozone, Mark Carney, BoE Governor speaking, ECB monetary policy meeting and a slew of other slightly minor data. There will be moves on US Dollar on Friday so please do contact a member of the Aston team prior to this so we can implement orders for you at the appropriate levels.
If you have any questions please do let me know.
Have a great week.
Written by Liam Alexander