As painful as this is to write as a Scot, England thrash Panama at The World Cup, beat the Springboks at Rugby and the Aussies at Cricket, Lewis Hamilton wins the Grand Prix and ‘Brexit’ is now largely irrelevant. Also, it’s going to be 30 degrees in London this week so the Hawaiian tropics will be out.
Will the sun be shining on Sterling this week or will the USD and EUR lay siege to it like rampaging Love Island watching ‘yoofs’ in Falaraki for their summer holidays? Time will tell.
Is August going to be the month when the UK raises interest rates by 25 bps to 0.75%? At the last meeting the MPC (Monetary Policy Committee) was split 6-3. We will need the economy to tick up and with Government borrowing figures looking healthier we may finally be on for a further rate rise. However, growth figures have been as lacklustre as the Panama team were at defending yesterday although we should see a gradual improvement in these numbers.
Cable (Sterling/Dollar) has been trading in the region of 1.31-1.33 in recent trade.
You can view the movements on the graph below –
This week we have Mark Carney, The Bank of England Governor, speaking on Wednesday followed by the financial stability report. Thursday we have GDP figures out of the US.
Where is Sterling/Dollar likely to go? With weekend Brexit related headlines far from positive for the UK Sterling is likely to come under some selling pressure. If you have a requirement to sell USD and purchase GBP I would consider locking in some of exposure on a SPOT basis. We can then look to implement some market orders to take advantage of any further upside. Please contact the trading department to discuss technical levels.
Purchasing USD from GBP? I would suggest having a call with our trading department. I expect Sterling to push higher towards the end of the summer months although for now the Pound will remain on the backfoot. We touched 1.31 although we’ve since had a reversal back towards the mid 1.32’s. It may be prudent to take some risk off the table at current levels and cover some on a SPOT basis.
Friday we have inflation data out of the Eurozone in the form of CPI (YoY) (Jun). Other than that it is a relatively light data week for the EUR.
GBP/EUR has largely traded in a range from 1.13-1.1450 with 1.1450 being toppish after the move higher after the Bank of England. If you are looking to purchase EUR from GBP I would consider implementing a market order at 1.14 for a portion of your exposure whilst considering the 1.13 level as a floor. If you can achieve over 1.13 on SPOT I consider this a good level in the current climate. Please contact the trading department to discuss your individual requirements.
If you are selling EUR to purchase Sterling take advantage of current levels. Historically, anything under 1.15 has been considered great value. Look at covering off a Forward Contract out for 6 months till end of year to mitigate your currency risk. Q1 next year/March/Brexit? Currency rates quite frankly could be anywhere dependent on how negotiations go.
You can view the movements on Sterling/Euro on the graph below for last week –
INSERT GBP/EUR GRAPH
If you have any questions please do let me know.
Have a fantastic week
Written by Liam Alexander