ACM Update Monday 27th April 2020

Sterling has risen this morning with the PM Boris Johnson now back in the saddle. Will the month of May prove to be both the turning point in the fight against coronavirus and the restart of the economic engines? Let’s hope so.

Last week oil prices turned negative. Think about that for a moment. Global markets are the most chaotic they’ve ever been. If oil producers don’t cut output faster to offset the collapse in demand then storage facilities will quite literally be full to the rafters. We could see prices head further south again if a balance isn’t struck.

I think May is going to prove to be the crucial month in the fight against coronavirus and we may start to see a rally in global equities and a rebound in certain currencies.

The dollar will remain strong short-term as it is still the safe haven of choice for investors. Should we start to see an easing of restrictions in the UK then this should translate to a strengthening Pound. If you hold US Dollars and need to move into GBP it may be prudent to consider current levels. Please get in touch with the trading department to discuss your requirements. If you need to move into USD from GBP consider implementing some take profit orders around 1.25 the figure then stagger at different levels to the upside. The main release this week for the Dollar is Preliminary annualised Q1 GDP. A print of -4% is expected. If we print that number or slightly worse we should see this weigh on the Dollar.

Feel free to contact a member of the trading team and they can walk through technical levels that may be achieved in the coming weeks should it look like UK PLC is starting to rebound.

You can view the graph below for movements in Cable (Sterling/Dollar) last week –

In terms of GBP/EUR I think this will push higher, if we can see a sustained break above 1.15. From the Eurozone this week we have the release of preliminary GDP (QoQ) (Q1) which is expected to print -3.4% against a previous print of 0.1%. We also have GDP (YoY) (Q1) released with analysts expectations for a number of -2.9% against a previous figure of 1%. We also have Italy’s preliminary GDP numbers released for Q1 (QoQ) and (YoY) with prints of -5% and -4.5% respectively. You can see the trend. It isn’t positive.

The ECB meet on Thursday and it will be interesting to see what further measures they suggest or implement after their emergency €1.1 trillion bond buying scheme. How they communicate the message and their strategy may help the Eurozone come closer together after the recent north/south divide issues raising their head yet again.

If you need to purchase Euro from GBP consider taking advantage of the recent move higher and in addition implement some take profit orders to the upside. You can view the recent moves in the graph below –

Whilst I don’t see any major sustained moves this week we might well see a shift higher in May. Please get in touch with the trading team and they can discuss their outlook and how they can structure transactions for you so you mitigate downside risk.

Hope your week is as positive as it can be.

Any questions on the above or if you would like to discuss your requirements please feel free to contact me directly.

 

written by

Liam Alexander

Liam Alexander is the CCO at Aston Currency Management.