ACM UPDATE MONDAY 9TH DECEMBER 2019

Election week is finally upon us (again). Could there be a Corbyn majority? As we’ve seen in this decade of elections and referendums anything is possible. If there is a Corbyn majority, it would be as much of a surprise as the banana duct taped to a wall in Art Basel going for $150,000. Utterly bonkers.

We believe there will be a Conservative majority at the General election. We expect Sterling will have a spike higher on the news although the move will be modest. Should we have a hung parliament then expect the sell off on Cable (GBP/USD) to be severe.

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

GBPUSD 09122019.JPG

If you are purchasing USD from GBP consider placing an order in the market at 1.33 prior to the election. This should give you the opportunity to achieve near the highs over the past 12 months. Please do get in touch with your relationship manager or a member of the trading department to implement a trade.

If you are selling Dollars I would look at converting some of your US Dollars on a SPOT basis prior to the election. I do think we’ll move higher so it would prudent to lock in some now. Again, please get in touch with the trading department and they will provide you with a rate of exchange.

Do you think there will be a hung Parliament? If you do, and you think Sterling is going to be sold off heavily, implement some take profit orders to the downside to take advantage of any moves lower in Sterling/Dollar. It could be a sizeable move lower. Please make sure you discuss a strategy with us prior to this Thursday.

On Sterling/Euro, if you need to purchase EUR I would look to take advantage of the recent move and lock in some on a SPOT basis. We are now trading at 24 month highs. Might we push through 1.20 the figure towards the end of this week on Sterling/Euro? Quite possibly. However, as recent history suggests we might be back down at 1.11 should there not be a Conservative majority. Please take some risk off the table and lock in some on SPOT and then implement a take profit order for the remainder and try and average up your rate higher.

If you need to sell EUR back into GBP please put a plan in place. I do think we’ll move higher so lock in some at current levels on a SPOT basis.

You can view movements on the graph below on GBP/EUR -

GBPEUR 09122019.JPG

Whilst thoughts turn to pigs n blankets and all things festive there is still a few weeks to go before we can say goodbye to 2019. On the data front this week we have the release of the ZEW survey out of Germany. On Wednesday we have inflation data out of the US in the form of CPI (YoY) (Nov) with an expected print of 2% against a previous print of 1.8%. Following on from this US release we have the Federal Reserve Interest rate decision with rates to be left on hold at 1.75% and the Monetary Policy statement. On Thursday we have the ECB interest rate decision (won’t be any change) and then we have the ECB Monetary Policy Statement and Press conference. Rounding off an exceptionally busy week we have US Retail Sales released on Friday with a print of 0.4% expected.

By Friday the FX landscape will either be marginally changed or significantly changed dependent on the General Election result. The team will be on hand late on Thursday and into early Friday morning to assist all our clients with their specific requirements.

If you have any questions please do let me know.

Have a fantastic week.

Written by Liam Alexander

written by

Liam Alexander

Liam Alexander is the CCO at Aston Currency Management.