ACM Update Monday 24th August 2020

EUR/USD is back around 1.18. Sterling/Euro is trading below 1.11 and Sterling/Dollar is battling 1.31. The FTSE and European equity markets are on the up this morning with an easing of US/China tensions. An easing or indeed a balanced assessment of some of the absurd everyday Covid restrictions would come in handy although there is more chance of Lord Lucan turning up. 

Sterling rallied higher last week and broke through 1.32 the figure against the Dollar before some profit taking and better than expected US data pushed it lower.

You can view the movements in the graph below –

Where next for Sterling? Sterling is fighting an internal battle. On the one hand – economic data has been better than expected. Retail Sales for July rose 3.6% showing there is life in the sector. Indeed, forecasts are for a record breaking third quarter for the UK economy. On the other hand, we have uncertainty around the furlough scheme and of course our dear old friend Brexit. Recent talks have showed little sign of progress between the EU and UK. Outcome? Sterling will struggle to be decisive in either direction.

The US Dollar will likely be the catalyst for any significant moves in Cable (Sterling/Dollar). We have the Jackson Hole Symposium this week, albeit virtually. Traders will be looking out for the Federal Reserve’s President Powell’s take on next moves. Rates have already been cut to record lows and the stimulus packages introduced already have been unprecedented. What do they do next? Do they go into negative territory on rates? Do they boost bond purchases? Tolerate higher inflation? The dollar will likely move Thursday on any new information the market receives. If you have a USD requirement please make sure you have a conversation with one of the traders at Aston. Our traders will put a plan in place for you to make sure you are protected against any adverse moves whilst allowing some room to take advantage of any intraday or overnight moves. If you have a requirement to purchase USD from GBP locking in some of your requirement on a SPOT basis may be a prudent thing to do.

In terms of Sterling/Euro I don’t see any significant movements this week. We are settled above 1.10 the figure although any sustained break to the upside looks challenging. The Eurozone had weaker than expected PMI data released end of last week and traders will be looking at German GDP figures and the release of German IFO (Sentiment data). Should we see better than expected prints tomorrow for German GDP and IFO then we may see a rally in the Euro. If you have a requirement to purchase EUR from GBP it maybe worthwhile having a conversation with the trading team to discuss SPOT prices.

You can view the recent movements in the graph below –

Currency markets are going to prove incredibly tough to navigate for the remainder of this year and into next. Forecasts on where Sterling will trade vary enormously due to the almost unfathomable number of paths the UK can tread. Please do make sure you have a robust plan in place and speak with your point of contact at Aston so you mitigate your currency risk.

Indeed, if you think any of your clients, suppliers, investors, friends or family can benefit from an introduction to Aston’s services please click on this link -   

https://www.astoncurrencymanagement.com/introducers

As always, we’re here to help. If you would like to reach out to me directly with any questions please do let me know.

Have a fantastic week

written by

Liam Alexander

Liam Alexander is the CCO at Aston Currency Management.