Like an inebriated asthmatic baby elephant the UK stumbles nearer a solution to the next round of Brexit talks. Sterling has rallied recently. Will it continue? Or will it come crashing down to earth like a Christmas shopper on a bitcoin fueled mulled wine induced shopping spree?

December 14th is the key date when the EU Council summit convenes. Should there be a breakthrough prior to this date then Sterling will rally. However, I don’t expect imminent progress. The European Courts of Justice issue, along with the Irish border remain significant hurdles to scale in addition to the ‘divorce’ bill settlement.

Expect further volatility around Sterling in December.

Against the US Dollar, Sterling has gained significantly and briefly pushed through 1.35 the figure. 

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

If you have a requirement to purchase USD from GBP consider covering off a percentage of your requirement on a SPOT basis at current levels. We are up over 1% in the past week.

December is a key month for GBP so it may also be worth structuring market orders to take advantage of upside going into end of year. Please contact the trading department or your relationship manager directly to implement these at appropriate levels.

If you are holding US Dollars then look at staggering market orders to the downside. The Dollar has pared some of it losses from last week with news that Trumps’ overhaul of Tax looks set to continue with the US Senate narrowly approving the tax reform.

Have you started to consider your FX risk for 2018? You may want to look at Forward Contracts from now until the end of Q1’18 to take some risk off the table.

Sterling/Euro

Consider taking advantage of the recent upside moves. We have had a move higher and at present we’re sitting comfortably in the 1.13s. Will this be the case in a few weeks’ time? As alluded to above, Sterling/Euro will be impacted on Brexit negotiations this month. Should talks breakdown? Sterling/Euro could be under 1.10 and lower. Make sure you have a plan in place to mitigate some of this potential downside risk. There are various trading mechanisms we can use to assist you. Please get in touch to run through your options.

You can view the movements on GBP/EUR on the graph below –

In terms of this week outside of Brexit negotiations we have the ECB President, Mario Draghi, speaking on Thursday. We also have Eurozone Retail Sales (MoM) and (YoY) released. Across the pond, we have the release of the NFP (Non-Farm Payroll) figure on Friday. These releases will cause some volatility on GBP/EUR/USD pairs.

If you have any questions please get in touch.

Have a fantastic week.

Written by Liam Alexander.