The Autumn budget was a quite remarkable event in recent British politics. I.e. it was quite unremarkable. Something to be celebrated I guess. Small wins and all that. The British Government need to solve the Irish Border issue in the next ten days apparently. If they solve that issue in the next ten days I’ll even pretend to care who Meghan Markle is.
The Euro has been weaker for oh, in the grand scheme of things, about 2 minutes. Germany being Germany, they’ve managed to ease the political and coalition tensions within a week. If the UK thought that Merkel being weakened at home would provide us with a stronger negotiating hand at the table then it looks like we are going to be let down.
EUR/USD has pushed above 1.19 the figure and two month highs with a challenge of 1.20 on the cards in the coming days. In turn, GBP/EUR has dropped below 1.12 the figure after hitting giddy heights above 1.13.
You can view the movements below on GBP/EUR last week
If you hold Euro’s I would consider taking advantage of the recent move and cover off some into GBP on a SPOT basis. Please contact the trading department for a rate of exchange.
We don’t have too much UK data out this week so there may be an opportunity to implement market orders to take advantage of any further moves lower. The only data releases of note from the UK are the BoE’s Financial Stability Report, UK confidence data, and Manufacturing PMI on Friday.
I don’t see too much upside for Sterling. Politics and the Irish Border issue are going to be a drag on GBP for the next few weeks. However, might there be some goodwill creeping into negotiations? If we continue to hear phrases like “good chance”, “progress is being made” then Sterling might, and it is a big might, gain from this. Whatever happens, I don’t see Sterling suddenly moving substantially higher. UK Fundamentals are far from strong although in the run up to Christmas politics and the EU summit in December take precedent.
If you haven’t already, you should start planning for Q1 ’18 now. Feel free to get in touch and we can discuss a strategy with you for January before everyone hits the gym and “gets healthy” for three weeks.
Sterling/Dollar has moved higher. You can view the movements on the graph below –
We’re up at 7 week highs on Cable (GBP/USD) trading a little under 1.3350. This has been largely a USD weakness move with a sprinkling of GBP cheer. We were up around 1% last week with US data disappointing to the downside with the manufacturing and service sector expanding at a slower pace than expected.
If you have a requirement to purchase USD from GBP consider locking in a substantial amount at these levels to take some risk off the table going into December and January. I expect Sterling/Dollar to retrace the recent upside with Sterling likely to come under pressure in upcoming trade.
Have you considered forward contracts at these levels? If you haven’t, drop me a line and we can discuss the pricing out for 1 month/3 months and 6 months. It may be prudent to lock some in at a fixed price so you know where you stand into the beginning of the 2018.
If you are holding USD and need to convert back into GBP it may be worthwhile placing market orders at 1.33 to give yourself a price point to aim for. We can then take a view on what to do from there.
Politics will be the driving force for December so please make sure you have spoken with the team at Aston to implement a strategy that best suits your needs.
Have a fantastic week.
Written by Liam Alexander