A week is a long time in politics they say. It seems even longer in currency markets. We were trading close to 1.44 on Cable (Sterling/Dollar) just over a week ago and like the British weather, it has plummeted drastically. Will it be eternal darkness for Sterling for the rest of the year or will be able to get the Hawaiian tropics out at some stage?
Weak growth figures out of the UK last week has now increased the likelihood that the Bank of England will keep interest rates at 0.5% in May. Was the expectation of a rate rise by 25bps to 0.75% propping up Sterling? Now those waters are muddied will Sterling fall further? You can view the recent moves on Sterling/Dollar on the graph below –
If you have a requirement to sell USD and purchase GBP lock in these gains now. Please contact a member of the trading department for a SPOT or Forward rate.
Might Cable (GBP/USD) take another tumble like an over pampered football player? Perhaps. However, as we have seen on the other side of the trade we were well above 1.40 not long ago and that now seems more a climb than a gentle stroll back up the hill.
With GDP figures coming in at 0.1% I don’t think we can solely blame the ‘Beast from the East’ (how these phrases become common parlance I have no idea). However, it did have an impact. Is there a deeper economic malaise set to become further ingrained now we’re getting down to the finer points of ‘Brexit’? Quite possibly. Please consider a more enhanced risk based approach around Sterling for the remainder of the year. Feel free to contact me directly or one of the trading team to discuss a strategy around your individual requirements. Whilst economic data out of the UK has been rather grim the political situation looks far from rosy. This is having an impact on Sterling too.
If you need to purchase USD from GBP please consider covering off some on SPOT to take out further downside risk and implement market orders to take advantage of any rallies in GBP/USD. Please contact the trading department to discuss technical levels.
This week we have the Federal Reserve Interest rate decision alongside the Monetary policy statement and Non-Farm payrolls (Apr). US wages and inflation are paving the way for an interest rate rise. I’d be surprised if anything changed this week although I expect them to give us the nod that a rate rise will happen over the summer months. This should boost the US Dollar further potentially dragging EUR/USD under 1.20 the figure and maintaining the downside pressure on Cable (GBP/USD). As always with the golden haired chap in the oval office, trade relations could deteriorate at any stage so the US dollar isn’t a one way bet.
Please make sure we have had a conversation prior to Wednesday on your USD requirements.
Please have a look at the graph below to view recent price movements.
After trading over the 1.14 handle Sterling/Euro has since dropped further. Sterling is being weighed on Brexit concerns around the Irish border issue after EU negotiator Michel Barnier made some comments. This week we have preliminary GDP (QoQ) (Q1) and (YoY) (Q1) out of the Eurozone in addition to the Unemployment Rate (March). Preliminary inflation data in the form of CPI is released on Thursday from the Eurozone rounding off a rather light data week.
If you have a requirement to convert EUR/GBP please get in touch with the trading department and take advantage of the recent moves in your favour. There might be some further room to go in the move so consider implementing market orders to the downside. We’ve largely been trading in a range of 1.11 to 1.16 being toppish so you’re in a good position on SPOT at present.
Purchasing Euro’s? Can you afford for Sterling/Euro to test 1.10? In the current FX landscape anything is possible. Please do consider taking some risk off the table on SPOT whilst looking to take profit on orders on any rallies on GBP/EUR.
If you have any questions please do let me know.
Have a fantastic week
Written by Liam Alexander