ACM UPDATE MONDAY 8TH JULY 2019

Cable (Sterling/Dollar) broke through the psychological level of 1.25 the figure last week. Will Sterling/Dollar be as volatile as the tennis player Nick Kyrgios? Unlikely. As we have said previously, we expect Sterling to remain under pressure for the summer months.

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

GBPUSD 08072019.PNG

Sterling/Dollar was trading at the lowest levels since January last week. We have since had a rebound higher although this may prove short-lived. The move was largely Dollar driven with the NFP (Non-Farm payroll) figure printing an increase of +224K jobs. This number came in well above expectations that gave the Dollar a boost across the board. The clarification that the US jobs market is in good health will mean that the Federal Reserve will only cut interest rates by 25 basis points at the end of the month. Might the Federal Reserve not feel the need to now cut rates at all? Perhaps. However, they have communicated a rate cut to markets and I expect a 25bps cut. A 50bps cut would be a shock so I think that’s off the table.

This week we have a relatively quiet week on the data front. The main release from the US is inflation based. We have the Consumer Price Index (CPI) released (YoY) and (MoM) on Thursday from the US with prints of 2% and 0.2% expected respectively. If the figures come in bang on expectations or slightly better? Expect the Dollar to make some gains against both Sterling and the Euro. We also have the FOMC minutes on Wednesday so this may move the Dollar.

In terms of the Sterling angle this week? It looks rather subdued. We can all focus on the tennis at Wimbledon quite frankly. There isn’t much that is going to shift Sterling so it may drift. It will likely move lower as I don’t see anything that is going to aid Sterling to the upside. We have GDP (MoM) (May) released on Wednesday morning from the UK with expectations for a print of 0.3%. Should this come in lower then expect Sterling to dump further.

If you hold USD and need to move back into Sterling take advantage of the recent moves lower on a SPOT basis. Please contact the trading department for a rate of exchange. There may be room for it to move lower so also do consider implementing take profit orders to the downside should we see any intraday moves in your favour. Again, please contact the trading department to implement these orders.

If you need to purchase USD from GBP? Whilst rates are not great at present could they potentially fall to 1.20 and below? Yes. With the potential for the UK to exit Europe with a ‘No deal’ then a sizeable fall in GBP/USD is a possibility. Please speak to our trading department to discuss your options between now and the end of October.

Sterling/Euro? Like Sterling/Dollar we shifted lower. We are currently trading around 1.1150. Is there more room to go? If we have a sustained break to the downside under 1.11 then a gradual trend lower may develop. The only salvation for Sterling on this pair is that the Euro is hardly firing on all cylinders. I’d expect Sterling/Euro to remain in a range of 1.10-1.13 over the summer months. I wouldn’t expect any massive moves in either direction.

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

GBPEUR 08072019.PNG

This week we don’t have too much data out of the Eurozone. We have inflation data out of Germany with the release of Harmonized Index of Consumer Prices (YoY) (Jun) although under than that there isn’t much that the market will be looking at.

Any moves this week will likely be on commentary from Central Bank officials or our beloved political figures. Brexit will continue for the summer months. Whilst not as annoying as reading about Love Island it is certainly getting close!

Have a fantastic week.

Any questions please let me know.

Written by Liam Alexander

written by

Liam Alexander

Liam Alexander is the CCO at Aston Currency Management.