ACM Update Tuesday 13th October 2020

I am glad we have clarity now. We have three tiers and there may be tiers within tiers. There will certainly be tears the longer this goes on. Is a new ‘Winter of discontent’ round the corner?

We have a relatively quiet week on the data front this week. From a UK perspective we had mixed jobs data released this morning. The ILO Unemployment rate (3M) (Aug) came in at 4.5% against expectations of a print of 4.3%. However, the claimant count change (Sept) was better than expected with a smaller than expected increase.

Sterling is shrugging off some of the mixed jobs data and headlines around Bank of England and negative rates. We have traded around 4week highs against the Dollar at 1.3080 although we have since had a retracement lower.

You can view the movements in the graph below –

We’re around 1.6% higher over the last 4 days. If you have arequirement to purchase USD from GBP consider locking in some of gains. We are largely fighting a battle around the 1.30 figure with moves from 1.28 and 1.32 and no clear break in either direction.

If you would like SPOT rates or to discuss implementing take profit orders please get in touch with your point of contact at Aston. The restrictions implemented by the PM have largely been ignored by Sterling although should restrictions get tougher then expect Sterling to head south. Brexit negotiations are entering ‘final’ stages with the deadline for a trade deal on Thursday. Will a deal be struck in time to be ratified before the end of the transition period on 31st December? We will have a far greater idea by end of week. Should no deal be struck then we are trading on WTO terms. Sterling would take a sizeable move lower. Please get in touch with a member of the trading department to discuss your hedging options out till end of year. I think a deal of some description will materialise and I expect Sterling slightly higher end of year. However, this year, quite frankly, who knows. Please do though have a strategy in place to at least mitigate some of the downside risk and allow yourself margin to take advantage of any moves in your favour.

Wednesday we have the ECB president, Christine Lagarde speaking. Like the UK, there are rising virus cases in the Eurozone with stricter restrictions imposed in Spain, France and Germany. This poses downside risk for the EUR. We may see further downside through EUR/USD that may give GBP/EUR a nudge higher. We are trading over 1.10 the figure on GBP/EUR. If you can secure around that level it may be prudent to take advantage of this recent move.

You can view the movements in the graph below –

I don’t see any major moves this week in GBP/EUR with no data of note released. We will likely trade in a range of 1.0950-1.11. If you would like to discuss your specific requirements out till end of year please get in touch with a member of the Aston team and they will be happy to chat through your requirements.

If you have any questions please feel free to reach out tome directly.

Have a great week

written by

Liam Alexander

Liam Alexander is the CCO at Aston Currency Management.