ACM Update Tuesday 14th April 2020

Sterling has started off the week on the front foot and is at monthly highs against the Dollar. Are we approaching overbought territory or is there more room in the move?

Will Sterling/Dollar push significantly higher short-term? I don’t believe it will. The US Dollar is the safe haven of choice for investors at present. I expect this to continue. Emerging markets will continue to be under pressure from coronavirus and until that pressure is markedly eased expect Dollar positions to remain. Couple this with the expectation that the lockdown period in the UK will be extended and I would expect further downside pressure on GBP.

The economic impacts of the coronavirus are only starting to filter through and the hit to the UK and other countries is going to be sizeable. Any mention of growth will need to be set aside for 2021. This is going to be a tough old year for UK PLC. Please speak to one of the team at Aston and take a risk based approach to your upcoming requirements.

You can view the recent movements in the graph below –

I expect GBP/USD to drop back below 1.25 the figure. Some profit taking will take place after the recent ‘Boris bounce’ and a slightly subdued Dollar. If you hold US Dollars and need to move back into GBP consider implementing some take profit orders to the downside. Please contact a member of the trading department to discuss technical levels. Will we hit anywhere near 1.15 again? Unlikely. We will likely trade from now on around 1.20 and higher as the news flow ebbs from Sterling negative to positive.

If you need to move from GBP into USD look at covering off some on a SPOT basis and take advantage of the past weeks activity. Whilst no-one can say these levels are anywhere near great they are the best in around a month. I can’t see us moving too much higher short-term. If you would like a SPOT rate please contact the trading department.

In terms of GBP/EUR we have moved higher in the past week.Overnight and this morning we targeted 1.15 the figure although fell short. If you need to purchase Euro’s from Sterling look at securing some of the recent gains at current levels on a SPOT basis. Please contact the trading department for a rate of exchange.

You can view the movements in GBP/EUR in the graph below –

 

If you hold EUR and need to move into GBP I would implement take profit orders to the downside on this pair. I think we’ll see Sterling give up some of the recent gains so by having an order in place you take advantage of the 24 hour market should your level execute. Please get in touch with the trading department should you have any questions around this.

Currency markets, like Equity markets, are going to continue to be unpredictable and borderline chaotic over the coming months. You can utilise the services of Aston to implement Forward Contracts with attractive terms to mitigate your future cash-flow risk. If you would like to schedule a call with a member of the trading department to discuss hedging some of your risk please get in touch.

Any questions please do let me know.

Stay safe and have a good week.

written by

Liam Alexander

Liam Alexander is the CCO at Aston Currency Management.