The winter Olympics are underway. Sterling and the UK on ‘Brexit’ is mirroring the Luge. Hurtling downhill, strapped in for dear life, ‘skillfully’ manouevring the corners whilst hoping to come to a smooth standstill rather than crashing like the Jamaican bobsleigh team in the movie Cool Runnings. We will see how the UK/EU movie plays out this year.
Sterling rallied higher against the US Dollar and Euro last week on the back of the Bank of England’s ‘Super Thursday’. (It sounds like an offer from a 1980’s supermarket but never mind we’ll need to live with the phrase). As expected, interest rates were kept on hold at 0.5%. Sterling jumped across the board on growth forecasts for 2018 being revised higher to 1.8% from 1.7% and more importantly on expectations that interest rates will rise quicker than previously expected.
Sterling moved back above 1.40 the figure on the back of the Bank of England. With politics and profit taking being key Sterling has given up the gains it made and moved lower.
You can view the recent movements on the graph below –
If you are holding USD please consider locking in some of the move lower. Might Cable (GBP/USD) push lower? Of course. However, we’ve been over 1.42 so if you can achieve under 1.40 the figure to convert USD into GBP it may be prudent to do so. Please contact a member of the trading department for a rate of exchange. If you think we’ll see GBP push lower discuss technical levels with the trading team to implement market orders to help you achieve the best rate at the best possible time.
We had a lot of volatility last week so this week we may see some range bound trading. As always, ‘Brexit’, Theresa May and political posturing can always act as a headwind for Sterling so make sure you have discussed a strategy with us for your exposure out till the end of Q1. The main data out of the UK this week is Retail Sales (Jan) that is released on Friday. Other than that, we have inflation data out in the form CPI (YoY) (Jan) tomorrow where expectations are for a print of 2.9%.
Do you need to purchase USD from Sterling? Consider placing market orders to the upside should Sterling benefit this week. Please contact a member of the trading department to discuss.
We moved back over 1.14 the figure last week. Since then we’ve gradually traded lower. As stated at the start of the year I see Sterling moving lower against the Euro for Q1. We are trading in a range of 1.11 with 1.15 being toppish. Should we break out of this range to the downside then the 1.10 level opens up again. For now, I think we’re going to stick in the 1.11-1.15 range. Therefore, timing your transactions is key. If you are buying Euro’s from GBP get in touch and we can discuss your timeline on when you need to trade and put in place orders to take advantage of moves in your favour on an intraday basis.
We will see some dips on GBP/EUR with ongoing comments in the Brexit negotiations likely to weigh on Sterling rather than give it any impetus. EUR/USD has retreated from around the 1.25 figure with EUR long positions being cut. Could we see EUR/USD make another move higher against the Dollar? Quite possibly. That in turn could add further weight to a downside move in GBP/EUR.
You can view the recent movements on Sterling/Euro on the graph below –
As mentioned earlier it is a relatively light data week. Please get in touch to make sure you have a strategy in place for your currency requirements as the landscape can change rather quickly.
If you have any questions please do let me know.
Have a fantastic week.
Written by Liam Alexander