Apparently the Brexit withdrawal agreement is 95% complete. Hmmm. I wouldn’t bet the UK’s future on it. Oh wait, we are.
This week will be shaped by politics and headlines from the UK Government. Sterling took a hit last week with Cable (Sterling/Dollar) falling to just above 1.30 the figure. This was due to poor macroeconomic data from the UK and the failure at the European Council meeting to make the progress the market expected. Sterling has since had a slight recovery although is trading under 1.31 the figure.
You can view the movements on Sterling/Dollar on the graph below -
This week is relatively light data and event wise. We have the Bank of England Governor, Mark Carney, speaking on Tuesday and we have US GDP (Q3) Preliminary figures released on Thursday. This should give us a better handle on the direction for GBP/USD short-term. However, as we all know, trading Sterling is largely now subject to politics and Brexit. The UK Prime Minister, Theresa May, is in Parliament today and will inform politicians that the withdrawal agreement is almost complete. This should be interesting. Will Theresa May be able to deliver Brexit or will she be given her P45 before then? The fact we even have to discuss this is concerning. Sterling is going to be under pressure for the remainder of Q4. We will have some short-term spikes on GBP positive news so please make sure you are in a position to take advantage of these.
If you can achieve 1.30 or above to purchase USD from GBP I would suggest that is a level worth considering.
If you would like to discuss your upcoming requirements please contact me directly.
Similar to the above, Sterling has fallen around a figure from 1.1425 to 1.1325 on GBP/EUR. If you have a requirement to sell EUR/GBP please consider placing orders at 1.13 the figure. I expect some further Sterling weakness to come into play so try and take advantage of moves in your favour. As we’ve said for a while, the trading range on Sterling/Euro is from around 1.11 to 1.14. We broke slightly higher than 1.14 last week so if we see that move again please make sure you take advantage. Please discuss with the trading department technical levels to aim for.
You can view movements last week on Sterling/Euro on the graph below –
On the Euro front this week, the main event is the ECB meeting and press conference. Italian Government risks will weigh on the Euro. It’s investment grade rating will be reviewed by S&P on Friday. Where do we expect GBP/EUR to go? I expect a mixture of Sterling and Euro weakness this week that will ultimately mean the pair trades in a range. However, with most of the Brexit debate being centred in the UK we expect downside risks for Sterling. Please make sure you have a suitable hedging strategy in place.
If you have any questions please do let me know.
Have a great week.
Written by Liam Alexander