ACM Update Monday 16th March 2020

Those forecasts for 2020 that everyone wrote end of 2019? Out the window. Will this week prove to be as chaotic as last week? I’d be amazed if it wasn't.

Are we entering a global recession? Will the Bank of England follow the Federal Reserve’s rate cut? Where is Sterling going this week?

You can view the movements on Cable (GBP/USD) in the graph below. As you can see it has been one way traffic –

If you hold US Dollars and need to move into GBP consider covering off a large portion of your exposure at current levels. By the end of the week Cable (GBP/USD) had shed around 750 pips. Please contact the trading department for a SPOT rate. Remember, it wasn’t long ago we were above 1.30 on GBP/USD. This market is chaotic so Sterling/Dollar may well go under 1.20 or it could just as easily head north and move back to 1.30. Please get in contact with the trading department should you also wish to discuss implementing forward contracts out for the remainder of 2020 to provide you with stability.

At present the market is too difficult to call. The market is priced, mis-priced, then priced again. There’s a lack of liquidity. No-one wants to hold positions. Interest rates are being cut across the globe.Consumer confidence is shot, purchasing is being scaled back across the board.Will this last for the next couple of quarters and then markets rally in Q4? Possibly. Your guess is as good as mine quite frankly. It is tin hat time for the next few weeks at least.

If you need to purchase US Dollars from GBP please contact the trading department and we can look at ways to assist you. We could quite easily be under 1.20 shortly so do consider covering at least something off. As we always say, doing nothing is speculating.

In terms of GBP/EUR, the traffic has been heading the exact same way as Sterling/Dollar. You can view the movements in the graph below -

If you hold EUR do consider selling into GBP and taking advantage of these moves. Again, it was only a few weeks ago we were above 1.20 the figure. Please contact the trading department to discuss your individual requirements. For the most part any economic and data releases are going to be irrelevant this week. All news flow and market reaction is going to focus on Coronavirus, Central Bank co-ordination around stimulus and political commentary. Make no mistake, things may get a lot worse before they improve. Please make sure you aren’t on the wrong side of any further downside.

If you would like to set up a call with a member of the trading department please do let me know. Whilst we certainly can’t predict where things will go we can help mitigate your FX risk by implementing various strategies to protect against downside risk.

I would suggest getting in touch with the team here at Aston to discuss your options.

Whilst the ‘normal’ working environment may be changing for the next few months nothing will change in terms of how you deal with us throughout this challenging period.

Any questions please let me know.

 

written by

Liam Alexander

Liam Alexander is the CCO at Aston Currency Management.