EUR/USD has broken through the psychological level of 1.20 the figure. Does the Euro juggernaut continue climbing higher? Or will the single currency eventually get outmaneuvered by the US Dollar and brought down to earth like Conor McGregor was at the weekend?

Euro momentum continues. After speeches by the ECB president, Mario Draghi, and the Federal Reserve Chairperson, Janet Yellen, at the Jackson Hole symposium on Friday, EUR/USD broke through 1.1830 and then closed out the week a little above 1.1920. In yesterday’s trading we reached 1.1975 and in the overnight Asian session we finally broke through 1.20 the figure.

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

The move higher is a mixture of Euro strength and also Dollar weakness. I don’t see much on the horizon to change the general uptrend for the single currency against the dollar. The only saving grace will be intervention by the ECB whom determine the currency is getting too strong and talk it down. Alternatively, the US sorts itself out with regard to the upcoming debt ceiling and tax reform issues that will likely give the dollar some impetus. For now, expect the Euro to continue to strengthen. Mario Draghi had an opportunity last week to talk down the Euro and didn’t. I think the ECB are comfortable with the strength of the currency for the first time in a long time. Political risk may come back into the fray now the summer is coming to an end although for now expect further Euro strength.

If you have a requirement to convert Euro’s into US Dollars take advantage of the recent move higher. Please contact the trading department to lock in a rate of exchange. We are at 2 ½ year highs on EUR/USD.

Sterling/Euro

What does this Euro momentum mean for Sterling/Euro? It is tin hat time for GBP/EUR. Do I see anything on the horizon that will dramatically alter the trend lower? At this point, no. Is Parity on Sterling/Euro now a possibility? Yes. If you are a Euro buyer from Sterling you need to start preparing for this whether it materialises or not. Please contact the trading department to discuss your individual requirements. It might not happen but as I’m sure you’re tired of me saying, ‘doing nothing is speculating’. As discussed in previous reports I expected Euro to be the golden child of markets and I don’t see this ending at present. On Sterling, I remain negative. We have inflation report hearings out of the UK on Wednesday. Economic data will prove important although politics, posturing and positioning by the UK Government will likely determine Sterling direction. The UK Government need to play a winning hand at the table on negotiations soon or we’re going to see Sterling fall further.

We have inflation data out of the Eurozone in the form of preliminary CPI (YoY) and (MoM) and employment data out of Germany on Thursday. Other than these releases we are relatively data light from Europe this week.

If you hold Euro’s and need to convert into GBP consider covering off a substantial amount of your exposure at current levels. Please contact the trading department for a SPOT price and to implement market orders for any further moves lower.

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

Sterling/US Dollar

Will we break through 1.30 the figure or pullback from current levels if the US resolves the debt ceiling and tax reform issues?

If you’re a buyer of USD from GBP consider market orders at 1.30. Please contact the trading department to implement these. As mentioned in previous reports I don’t see huge variance in Cable (GBP/USD) to the end of the year. I think we’re toppish at 1.33 so if you can achieve 1.30 to buy USD I would look at covering off a sizeable portion of your exposure to de-risk things to the end of the year. The trading department can provide you pricing on Forward contracts out till end of December 2017.

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

If you have a requirement to sell USD back to GBP then look to stagger market orders to the downside. I would expect a reversal of the recent move higher with some Sterling weakness to come. We also have some important data out of the US this week in the form of employment data and the NFP (Non-Farm payroll report) that is released on Friday.

The summer and sangria is about to end for another year. Liquidity, traders and investors will be fully back to the table from next week. Expect market movements, German elections, UK/EU negotiations, the Conservative party conference, debt ceiling and tax reform issues in the US, North Korea, safe havens, and monetary normalisation all to play a substantial part from September onwards in currency markets. These events and issues will all lead to volatility. Make sure you have a plan in place and have spoken with a member of the Aston team to implement a strategy to de-risk your position and take advantage of any moves higher in your favour.

If you have any questions on the above please do let me know.

Have a fantastic week.

Written by Liam Alexander