Politics continue to dominate. Attention is shifting to the upcoming French elections. After ‘Brexit’ and the US elections I think it is safe to say no-one is going to read too much into the polls. We also have the small matter of the man with the funny haircut and the threat of Nuclear war. Take your pick between the chap in Pyongyang or Washington. 

Sterling has been on an upward trajectory. As suggested last week we thought Sterling/Euro would have a slight move higher and so it turned out. We broke through the 1.18 resistance level this morning although this has proven to be short-lived. We had a sell-off in Sterling this morning on the back of an announcement that Theresa May is due to issue a statement. We had a fall in the FTSE by around 1%. Will Sterling recover and post gains against the single currency? Perhaps. They will be modest gains however. A move higher will be largely dependent on EUR weakness from the first round of the French elections on Sunday. There will be some uncertainty and this should weaken the Euro short-term. I would expect the Euro to recover once we have pushed the first round of voting out the way and we have some clarity on things. 

After the moves higher in Sterling I expect some downward pressure to come towards the end of April. Like someone gorging on Easter eggs, the initial high is soon outweighed by a feeling of sluggishness. Consumer spending in the UK is much the same. We have Retail Sales out of the UK on Friday this week that will be keenly watched. There is likely to be a drop off in the numbers so that may weigh on the Pound. If you have a requirement to purchase Euro’s from GBP please do consider locking in some on a SPOT basis this week prior to Friday. Please contact the Trading Department for a rate of exchange. 

You may also want to implement a market order over the weekend to purchase Euro’s from GBP in light of the French elections. There may be a sell-off in the single currency so try and take advantage of the move in the Asian session on Sunday evening/Monday morning. Please contact the trading team to implement an order. 

You can view the upside movements in Sterling/Euro last week on the graph below. 

GBP/EUR 1 Week

If you have a requirement to convert Euro’s into Sterling then consider staggering market orders to the downside. Whilst there may be a short-term weakness to the Euro I expect Sterling/Euro to head back down towards the 1.15 level. The Eurozone is largely coming back to life. Eurozone confidence is on the up and is forecast to come in at a two year high. We have a number of inflation releases this week from the Eurozone largely in the form of CPI (Consumer Price Index). The Eurozone should maintain the momentum from Q1 into Q2. 

Sterling/Dollar

Sterling/Dollar is showing signs of movement again. We broke through 1.26 the figure this morning and then retreated to levels around 1.2520 on the back of the UK announcing a statement from the PM, Theresa May. The Dollar will move this week on the back of a number of Tier 2 data releases in the form of Industrial Production, Housing Starts, Fed Beige Book, Existing Home Sales and a couple of FOMC (Federal Open Market Committee) speakers.

Sterling/Dollar is likely to prove volatile this week.

You can view the movements last week on GBP/USD on the graph below – 

GBP/USD 1 Week

UK ANNOUNCEMENT

Theresa May, the UK Prime Minister announces early UK General Election

The rollercoaster ride continues. The UK election will be held on Thursday 8th June. Will this aid or drag on Sterling? We had an initial bounce. We will know more later this week on how the markets will take this announcement. 

Well, to round off this week’s report my statement of ‘doing nothing is speculating’ couldn’t be more apt. There are so many variables in the current climate. Please do get in contact with your point of contact at Aston to put a plan in place to mitigate your currency risk over the next few months. 

Any questions, and I’m sure there will be many, please do let me know.

Have a fantastic week.

Written by Liam Alexander