ACM Update Monday 17th August 2020

The US Dollar will remain on the back foot until the fiscal situation in Washington is resolved. In European news, Dastardly and Muttley won the wacky races from France back to the UK at the weekend to beat an arbitrary 4am deadline to avoid a 14 day quarantine.

Sterling/Dollar is holding firm above 1.30 the figure with a push back above 1.31 likely short-term. With the stalemate in Washington continuing, a postponement of China/US talks and FOMC minutes out this week we may continue to see some dollar weakness. If you have a requirement to purchase USD take advantage of current levels whilst implementing take profit orders to the upside. Please contact a member of the trading department to discuss SPOT prices and technical levels to structure orders. You can view the recent movements in the graph below –

I do expect a stimulus package in the US to be agreed. The question is when. Once that is announced we should see a resumption in strength of USD. Please make sure you have had a discussion around your specific Dollar requirements with your point of contact at Aston. Other than the FOMC minutes this week we are light around data out from the US. Focus will be on Washington and of course everything to do with Coronavirus.

From a UK perspective, well, where does one start. We’re in such a muddle that strategy meetings seem to take place whilst eating ice cream on a bouncy castle. We’re in bit of a revolving maze at present with Government, media and business all going in their own direction. We need to get some unity and clarity of thought and set a course and follow it. The UK economy suffered a massive decline in output and consumption in March and April. However, the economy is improving and it isn’t end of days as some like to paint it. Struggles and hardship to come? Yes. A cliff edge decline and rationing? No. The complexities of the economic, social and political cohesion required to navigate UK PLC out of these troubled waters are vast however.

Sterling is still sitting above 1.10 the figure. I do expect EUR/USD to come off recent highs and retreat to the downside. This should give Sterling a nudge higher. In terms of data that may give some impetus to Sterling this week we have the release of inflation data in the form CPI (YoY)(July). We expect to see an uptick from 0.6% to 0.7% on the release. We also have Preliminary Markit Services PMI (Aug) released. This gives us an indication around the economic health of the UK Services sector. This, of course, has taken a bit of a beating recently. We expect a healthy print of 57 that shows expansion with the UK taking steps in the right direction. Other than that we are fairly light on data this week.

You can view the movements in GBP/EUR in the graph below –

 

If you hold EUR and need to go into Sterling then take advantage of the SPOT rate. We are at attractive levels at present and I do expect a slight move higher in GBP/EUR.

As always, we are here to help. If you would like to discuss your individual requirements feel free to reach out to me directly or get in touch with your point of contact at Aston.

Enjoy what is left of the British summer. Have a great week.

written by

Liam Alexander

Liam Alexander is the CCO at Aston Currency Management.