Several international treasures have been lost this last week. With the passing of Hugh Heffner on one side of the Atlantic, and actress Liz “Vera Duckworth” Dawn over here in the UK, we should have known that this was going to be a tough weekend.

At home, our government is still in a quiet crisis, with PM Theresa May facing a potential leadership challenge as Foreign Minister Boris Johnson seems to be gaining momentum and undermining the PM. Concurrently Stateside, USD is on the rise on hopes that tax reform will pass but the mood in markets has generally deteriorated following violence in Catalonia and the shooting in Las Vegas which has left more than 50 dead and hundreds wounded.

GBP/USD

Weak UK manufacturing data (Purchasing Managers Index) has fallen short of expectations and GBP is finding it hard to hold onto the gains made last week against USD. UK GDP was downgraded on the annual level and other figures, such as the current account, fell short of our Chancellor’s hopes and dreams. The US dollar gained some ground on hopes for a tax reform (no matter what you think of it), among other reasons. Contrary to the UK, US GDP was upgraded and US manufacturing is showing some promise.

This week, Non-Farm Payrolls (published Friday) will be the key data for this currency pair. In the meantime, please consider taking advantage of remaining GBP value if you are buying USD. Get in touch with us to discuss reducing your exposure risk by fixing forward rates. Please be also be prepared for GBP to lose further ground as a potential rate hike by the BoE in November becomes less likely, although it is not yet beyond the realms of possibility.

GBP/EUR

Generally speaking if the same events were to occur in London and at the centre of Europe, the Euro could be expected to suffer less and right now it really is. Despite Merkle’s loosening of power in Germany there is a tangible sense of hope with a reshuffle at the finance ministry. Violence and unrest after an attempt at a referendum for independence by the Catalans is causing a drop in market confidence in Spain and that is spreading. Yet GBP has slipped against EUR. Realistically further losses can be expected this week but UK Services PMI out on Wednesday morning could possibly bring some better news and a possible boost back or temporary halt in decline.

Please mitigate further downside risk to GBP value and consider taking a view with spot trades in the short term. The longer term view is that GBP may yet still have far to fall before the year end, despite the withdrawal away from suggestions of parity by most commentators.

EUR/USD

After several months of European strength and stability (much to Theresa May’s chagrin) there now follows what I like to call “quantative queasing”. EUR has lost value against USD now and early Q4 looks to be full of political uncertainty. Chancellor Merkel has a weaker hold over Germany’s government and is even less likely now to be capable of instigating any significant reform for the Euro Zone. Weakened inflation figures may further delay QE tapering and subdue the Euro. On the other side, in the US, there are glimmers of stability and positivity which will contribute to an increase in USD relative value.

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.

Written by Damien Lipman