There are now more characters in the Conservative party leadership race than in the 1960’s Hanna-Barbera cartoon Wacky races. I will leave you to decide whom is Dastardly and Muttley out of the Prime Minister ‘hopefuls’.

This week, in addition to hearing why each of the Conservative Party candidates should be elected, we have the small matter of President Trump’s state visit to the UK. In his own unique and unorthodox style he has managed to enter the UK political and Brexit debate before he left Washington. Whether the UK pays too much attention to his commentary is another question. It’s safe to say that the UK has enough to focus on at present. However, I’m sure President Trump will continue to be predictably unpredictable so there may well be political fireworks this week at some stage.

Sterling/Dollar (Cable) fell to the lowest levels since January last week. I would expect any rebound and bounce to be limited due to the continuing painful and seemingly never ending political and Brexit uncertainties. We had Manufacturing PMI (May) out of the UK this morning that disappointed to the downside with a print of 49.4 against a consensus of 52.0.  Sterling was largely unmoved though on the release. There was a slight bounce in GBP/USD Friday with the Dollar being relatively subdued with a slump in US Treasury bond yields due to continuing fears of a global growth slowdown. However, this was limited. I don’t see much to drag the pair higher so I expect us to trade around these levels with a slight bias to the downside.

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

If you are holding USD and need to convert into GBP then I would suggest covering off some of your exposure at current levels. Might we drop lower? Yes. However, it was only a month or so ago that we were trading around the 1.32/1.33 level. Please contact the trading department for a rate of exchange. If you would like to structure a take profit order please speak with one of our trading team that can discuss technical levels with you.

Sterling/Euro -

We are now pushing to the lower end of the recent trading range. If you hold EUR I would take advantage of the recent moves and cover off some of your current exposure on SPOT. Please contact the trading department for a rate of exchange. On Thursday we have GDP (YoY) and (QoQ) (Q1) out of the Eurozone. Prints of 1.2% and 0.2% are expected. We also have the ECB interest rate decision and the ECB Monetary Policy statement and press conference. Should we see a sustained break through 1.13 the figure to the downside then this opens us up to further downside moves. The only saving grace for Sterling/Euro this week will be Italian political risks and what is said from the ECB President, Mario Draghi, around what it can do to combat risks on low inflation expectations and the ECB’s latest forecasts. I expect any upside in EUR to be limited.

You can view the movements on Sterling/Euro on the graph below –

It is sure to be an interesting week with President Trump in town and I believe he has already offended London’s Mayor before he stepped off the plane.

Have a fantastic week and any questions please let me know.

Written by Liam Alexander