Sterling is showing renewed strength for a second trading session in a row. Is the US Dollar coming back into vogue? Will the EUR continue to weaken? Picking the winner at The Grand National is easier to predict.

EUR/USD has been on the slide and is currently playing around 1.06 the figure. We have retreated from highs of just over 1.09 last month. Will we be targeting the 1.05 figure in upcoming trade? Is this going to translate to a move higher in GBP/EUR? If you have a requirement to purchase EUR from GBP it may be prudent to take advantage of the recent upside and lock in a percentage of your exposure on a SPOT transaction. Please contact a member of the trading department for a rate of exchange. There may be some further room to move higher so consider placing a market order around 1.1750. I don’t expect any sustained move above 1.20 short-term so if you have requirements this week do consider locking in now. 

You can view the movements on GBP/EUR from last week to this morning on the graph below – 

After we heard Mario Draghi’s dulcet tones last week the EUR went tumbling like an Easter egg rolling down a hill. Interest rates look set to remain on hold for the time being. What will the French elections do to the single currency? It’ll provide some volatility although I think it’ll end up being a non-event. The single currency will likely remain under some pressure for the remainder of April and into May. If you need to convert EUR back to GBP consider doing a small portion on a SPOT basis for the time being. There will inevitably be dips on an intraday basis although I do expect the trend to nudge higher so contact a member of the trading department to discuss implementing a strategy.  

Sterling/US Dollar

What now for Cable? (Sterling/US Dollar). This week price movements have been as dull as a storyline in the soap EastEnders. We had the Federal Reserve get together last week where nothing revelatory was shared. The stock market is probably overvalued at present and there’ll be a paring back of the balance sheet debt which is somewhere north of 4 Trillion. We didn’t receive any further clarity on the time of expected interest rate hikes so we should gain further insights later in Q2. We  had the NFP (Non-Farm payroll) figure released on Friday which disappointed to the downside. Expectations were for a figure of 180K and we got a print of 98K new jobs added for March. The labour market remains in fine fettle despite the disappointing number and I’d expect it to edge higher in April. The US unemployment rate also fell to a 2007 low.

You can view the moves on Sterling/US Dollar on the graph below – 

There are calls from various analysts for Sterling/US Dollar to trade anywhere this year from 1.05 to 1.40. Where will we end up? There are so many variables both politically and economically it is almost futile guessing. But estimate I will. I don’t expect us to be too different from where we are now at the end of 2017. We will be somewhere between 1.20 and 1.30 as a range. I expect the US Dollar to win the ugly parade again this year of the currencies. Sterling will largely be politically driven this year on Brexit negotiations. We had inflation data out of the UK this morning in the form CPI (Consumer Prices Index) that came in on expectation at 2.3%. Inflation has been picking up over the past few months partly due to a drop in Sterling that has hiked up import costs. We’re above the Bank of England target rate of 2% and I’d expect us to remain so for the remainder of 2017 and into 2018.

If you a USD seller back to Sterling I would consider locking in some of your exposure at current prices. Anything under 1.25 is good value. Please contact the trading department for a rate of exchange. I would also eye 1.24 the figure with a market order if you have a few weeks to play with. If you’re a USD buyer then cover off some of your exposure on a SPOT basis. As I always say, doing nothing is speculating. 

This week we have a few releases although not as hectic as last week. We have data out of the UK tomorrow in the form of the unemployment rate, average earnings and the Claimant Count change and rate. Out of the US on Thursday and Friday we have inflation data and Retail Sales rounding off the week. 

If you have any questions please do get in touch. It is chocolate eating time from Friday onwards for Easter so if you have any currency movements to make please get in touch by Thursday. 

Have a great week.

Written by Liam Alexander