ACM UPDATE MONDAY 24TH JUNE 2019

The Conservative leadership battle and Brexit rumbles on. Putting the Magna Carta together was more straightforward than Brexit.

Sterling will remain under pressure for most of the summer. There will be some brief moments of sanctuary for GBP although I don’t expect much more than that. Whilst Cable (Sterling/Dollar) has ‘rallied’ this is purely down to Dollar weakness.

You can view the movements on Sterling/Dollar on the graph below -

sg2019062436971.gif

Sterling/Dollar had dropped significantly into the low 1.25’s. The dollar has since been dumped with geopolitical tensions rising with Iran and the ongoing doubts over trade with China. Any movements on Sterling/Dollar this week are likely to be driven by commentary and politics rather than any data led activity. Indeed, the calendar is extremely light this week. We have GDP Annualised (Q1) out of the US on Wednesday with a print of 3.1% expected. Out of the UK this week we have the Bank of England Governor Mark Carney speaking and the inflation report hearings. In addition, rounding off the week on Friday we have GDP (QoQ) (Q1) released. This is expected to be revised down to 0.2% from 0.5%.

If you are holding USD and missed out on executing at the lower levels last week then do consider implementing take profit orders this week. I’d expect to see a retracement on Cable (GBP/USD) from the recent highs in the mid 1.27’s. Please contact the trading department to discuss levels.

On Sterling/Euro we are trading around the 1.12 mark. If you hold EUR I would consider taking advantage of the recent moves and lock in some of your exposure on SPOT transaction. Please contact the trading department for a rate of exchange. There is some second and third tier data out of the Eurozone this week although nothing to write home about. We will largely be moved by politics.

You can view the recent movements on Sterling/Euro in the graph below –

sg2019062437005.gif

The chances of a ‘No deal’ Brexit have increased. This is going to weigh on Sterling over the next few months. If you hold GBP and need to purchase EUR you are probably looking at the rate and thinking “I’ll hold off for now until it goes up”. What the last few years have taught us is that anything is possible and the ‘normal’ or ‘new normal’ doesn’t really apply anymore. What if Sterling/Euro went to 1.01 end of year? How would that impact your position? Whilst it is unlikely it isn’t that far fetched. Do consider at least covering some of your exposure off at current levels and put a marker in the sand. If there is a move higher in GBP/EUR with Greece and Italy’s issues impacting the single currency then you can take advantage if that happens. Please discuss rates with the trading department and put a plan in place over the summer months. That way you can enjoy the cocktails by the pool without worrying what UK PLC has done to impact Sterling since you last put on the suntan lotion.

If you have any questions please do let me know.

Have a fantastic week and enjoy the sun that looks like it has finally arrived!

Written by Liam Alexander

written by

Liam Alexander

Liam Alexander is the CCO at Aston Currency Management.