ACM Update Monday 14th September 2020

The rule of six commences in the UK today. It sounds like something straight out of the Hunger Games playbook. In this absurd new world perhaps the ‘rule of six’ is a race to the family home to elbow siblings out the way to get Christmas dinner.

Whilst ever more absurd and contradictory rules and guidelines come into play there is still the small matter of the economy to consider. However, it seems consider isn’t a verb that is used much in Government vernacular these days. Sterling had 5 days of consecutive losses against the Euro culminating in a six month low on Friday with fears of a ‘No deal’ and the surprisingly hawkish ECB monetary policy update. Indeed, the ECB President, Christine Lagarde played down fears of a rising Euro. You can view the recent movements in the graph below –

There aren’t any releases of note today so traders attention will be fixed on the debate of the Internal Market Bill in the House of Commons. This is the latest twist and shot of brinkmanship between the UK and EU in what can only now be described as the Brexit saga. Sterling short-term direction is going to be influenced by the outcome of the vote on the bill.

If you hold EUR and need to move into GBP take advantage of the current SPOT rate. It was only a couple of weeks ago we were over 1.12. Please get in touch with the trading department at Aston to secure a SPOT price. If you think there is further to fall for GBP/EUR (some analysts are predicting parity – although I doubt we will go there) then discuss technical levels with our trading team and they can implement take profit orders for you to secure your target rate over a specified time frame.

On the other side of the trade, if you didn’t purchase EUR a few weeks ago from GBP then please get in touch with your point of contact at Aston. You can discuss your specific requirements in more detail and determine a strategy going into Q4.

Sterling/Dollar has dropped into the mid-1.28's after settling above 1.30 in September.

You can view the movements in the graph below –

 

Sterling is vulnerable to the vote in the commons today so we may see a push lower towards the 1.25 region or we could see a sharp move higher to challenge 1.30 the figure again. Please do get in touch with the trading department if you have a GBP/USD requirement. If you hold USD consider taking advantage of the recent move lower by covering off some of your exposure on SPOT whilst implementing a take profit order for the remaining amount of your exposure. Should you have any hedging requirements out till end of year, again, please get in touch and we can discuss margin requirements with you.

We have the ILO Unemployment rate (3M) released on Tuesday. The expected print is 3.9%. In addition, we have the Bank of England and the Federal Reserve meeting this week although both are expected to be non-events.The Fed indicated a long-term dovish policy shift and are expected to keep rates on hold with commentary around inflation targeting. The Bank of England will keep rates on hold. We need to see how the end of furlough plays out and the autumn budget to get a better understanding of what direction the UK is heading in. At present, it doesn’t seem any developed nation on earth has a clear grip of the direction they are going in to come out the other side of the coronavirus pandemic.

Q4 is around the corner and this may well be the most chaotic end of year in an extremely long time. The FX landscape may look incredibly different come 2021 so please make sure you have a considered plan in place around your upcoming requirements. Speak with a member of the trading team and if you think any of your clients/investors/partners would benefit from a conversation with the Aston team please feel free to reach out to me directly.

Have a fantastic week and enjoy the last good weather of 2020.

written by

Liam Alexander

Liam Alexander is the CCO at Aston Currency Management.