ACM Update Monday 3rd August 2020

August is up and running. EUR/USD is through 1.1750 and Cable (GBP/USD) is sitting above 1.30 the figure. Will the Dollar remain under pressure or will the NFP (Non-Farm payroll) figure released this week provide a halt to the Dollar slide?

How times have changed. People are encouraged to wear a mask into the Bank. The normalisation of the exceptionally not normal is evidently here to stay for a while yet. How will UK PLC come out of this? It depends whom you listen to. It ranges from a sharp V shaped recovery to the end of society as we know it and an economic cliff edge that we haven’t seen before. As always, it will probably be somewhere in the middle. Stating the obvious, it has been a tough year for the global economy and all of its citizens and it will continue for the remainder of 2020. However, the show must go on and it will.

Sterling has climbed off the canvas after a barrage of blows keeping it in the low 1.20s for a large proportion of this year. Is there more room to run on Cable (GBP/USD)? Perhaps. However, if you are purchasing USD I would look to take advantage of the dollar weakness and lock in some USD around 1.30. I would expect a strong number of jobs ‘created’ (people going back to their previous jobs) so we should have a strong NFP figure. Couple this with a likely increased stimulus package from the US to stave off austerity for around 25M Americans and this will likely give the dollar a boost driving GBP/USD back below 1.30 the figure. Please contact a member of the trading department to discuss SPOT and Forward rates.

You can view the recent movements on GBP/USD in the graph below –

 

On Sterling/Euro we are trading blows at present with GBP winning a couple of the latest rounds. You can view the recent movements in the graph below –

The Eurozone economies are still open and functioning (mostly, for now) and Retail sales (YoY) (Jun) due out Wednesday are expected to show an improvement from -5.1% to -0.5%. This may contribute to some limited EUR strength. Thursday – attention moves to the UK. We have the Bank of England minutes and details on interest rate decision/asset purchase facility/monetary policy report and then the Bank of England Governor, Andrew Bailey, speaking. These used to be billed as ‘Super Thursday’s’. No matter what comes out of these events I don’t think ‘super’ covers any outcomes.

We have had UK Manufacturing PMI released this morning that printed 53.3 – the highest reading since the end of 2018. Whilst good news, it must be tempered that it will take a few months yet for the lost output during the pandemic to be fully restored. Sterling has pushed slightly higher on the back of the release this morning .

Planning your FX strategy at present is complex. You don’t want to be either over or under hedged with so much uncertain. If you would like to chat through your specific requirements please get in touch with a member of the trading team. They can discuss a strategy that works for you to allow flexibility to take advantage of moves in your favour whilst minimising downside risk against any adverse market moves.

Please feel free to get in touch with me directly should you have any questions.

Have a fantastic week

written by

Liam Alexander

Liam Alexander is the CCO at Aston Currency Management.