Sterling/Dollar is struggling to find direction around 1.25 the figure. It seems to have lost its navigation as might Peter the Great when he lived in Deptford, South East London for a few months in 1698. The few months he lived there would have felt shorter though than the now de rigour over politicised Bafta speeches that are agonisingly trundled out.

Sterling/Dollar

Price action on Sterling/Dollar (Cable) is likely to follow the recent trading sessions with spikes and dips on an intraday basis. EUR/USD has retraced the upside move that printed above 1.08 briefly with a move back below 1.0650. I would expect 1.06 the figure to be targeted in upcoming trade that will likely drag Sterling/Dollar lower. The Dollar is going to be the main driver for both EUR/USD and GBP/USD in the coming weeks.

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

Sterling/Dollar

Currency markets are now largely driven by political events and commentary. What will Trump say next? Is the Japanese PM his new best friend? Will Theresa May clash with European counterparts at the EU summit in March whilst triggering Article 50? Who knows. What we can guarantee is that due to the irrational behaviour of the political elite and the electorate currencies are going to move aggressively. Currencies may go up, down, sideways, do a triple somersault, then come back to exactly where they were. Timing your transactions is key. Please contact me or a member of the trading team to discuss your upcoming requirements in detail.

Aside from wondering what is going to come out on Trump’s Twitter feed we have numerous data releases out that will drive short-term movements. The key release out of the UK tomorrow is inflation data in the form of CPI (YoY) (Jan). No prizes for guessing if inflation is going to move higher. Will we print 1.9% as is widely expected, or will we potentially challenge the Government inflation target of 2%? I can see us printing 2%. This will of course then up the ante for the MPC (Monetary Policy Committee) and the BoE (Bank of England) to raise interest rates. Tomorrow we should see a bounce in Sterling although after the initial uptick higher the market will say “oh yeah, we still have the small matter of triggering Article 50 soon, might as well get shot of Sterling again”. The British Pound has proved resilient over the past week or so making modest gains against the Dollar. However, after a move back to around 1.26/1.27 I expect the downtrend will resume. If you have a requirement to purchase USD from GBP please contact me to discuss implementing a market order on a GTC (Good till cancelled) basis.

If you hold USD what should you do short-term? As you are all frightfully bored of hearing me say, doing nothing is speculating. Might we see a push lower on Sterling/US Dollar in upcoming trade? Quite possibly. However, if you look at where we are trading compared with 12 months ago then you are around 18% better off. Consider covering off 50% of your exposure on a SPOT basis. Contact me for a rate of exchange. We can then stagger market orders to the downside to execute at over the coming weeks.

We have Retail Sales (MoM) (Jan) released from our cousins across the pond on Wednesday afternoon. We also have the Fed Chairperson, Janet Yellen, speaking on Wednesday evening. Will we receive any new pearls of wisdom from the Federal Reserve? Unlikely. It will probably be a case of steady does it with language indicating that the Federal Reserve has capacity to raise rates this year. I don’t see a massive amount of movement on USD on the back of this.

The US economy is bouncing along well enough so if it is down to purely economic indicators then the Dollar should strengthen. It isn’t of course that simple. If you would like to discuss your Sterling and US Dollar exposure please feel free to contact me directly.

Sterling/Euro

Good old Sterling/Euro. It feels like a mid-tier Premier league club come March. It’s not going to get relegated and neither is it going to win the league. So what does it do? It plods along doing just enough to maintain the current position. We’re not seeing much excitement on this pair although the general trend has been to move higher, albeit at a very gradual pace. I would expect Sterling/Euro to continue this theme due to political uncertainty and elections in the Eurozone unsettling the value of the single currency. Indeed, after hitting the low 1.13’s we have had a gradual shift higher with a few reversals short-term.

You can view the graph below on Sterling/Euro to see the movements last week –

Sterling/Euro

If you are buyer of EUR from Sterling I would stagger market orders to the upside to take advantage of any moves on an intraday basis. I would implement orders firstly at 1.18 the figure with the next level being 1.1825. We’re unlikely to see any sharp move to challenge the psychological level and maintain support over 1.20 anytime soon. Please contact me directly if you would like to place any market orders. We have sentiment surveys out of Germany and the Eurozone in the form of ZEW releases and we also have GDP data (QoQ) and (YoY) (Q4) out of the Eurozone tomorrow. This will move the market and we may have a short-term boost to the Euro. If you need to purchase EUR it may be worthwhile to do first thing tomorrow morning on SPOT basis prior to the release. If you have some time I would implement orders as suggested above.

If you need to convert EUR into Sterling I would look to take advantage over the coming month on the political uncertainty that the UK faces triggering Article 50. Contact me to discuss appropriate levels to aim for on EUR/GBP. With volatile markets and large price swings being the ‘new normal’ please do have a plan in place to mitigate your currency risk. We will in all likelihood have increased volatility in Q2 once Article 50 has been triggered.  Please do contact us to structure and put a strategy in place.

If you have any questions please do let me know.

Have a fantastic week.

Written by Liam Alexander