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ACM Update Tuesday 19th January 2021

Sterling is favouring the upside in recent trade against both the US Dollar and the Euro. Will the momentum continue or will Sterling start to drift like those New Year’s resolutions?

Cable (Sterling/Dollar) is battling to stay above 1.36. You can view the movements over the past week in the graph below –

We are up around 7% over the past 3 months. If you have a requirement to purchase USD from GBP consider locking in some of those gains. I think there is some further upside to go although take some risk off the table and give yourself a price point to work from. You can discuss technical levels to aim for with the trading department and they can implement take profit orders staggered to the upside. I think we might see a run up to 1.40. Last time we were trading at 1.40? Almost three years ago. Please get in touch with the team at Aston to discuss your USD exposure and we can put a plan in place for you for the remainder of Q1.

It is relatively light on the data front this week. From a GBP perspective we have inflation data in the form of CPI (YoY) (Dec) with an expected print of 0.5%. From a US perspective we have Janet Yellen’s confirmation speech as US Treasury Secretary today. The market expects her to endorse heavy fiscal stimulus with low interest rates helping the argument. It may get growth back on track whilst fighting the pandemic and helping with the rollout of the vaccine. A close eye will need to be fixed on the debt burden although the benefits of stimulus should outweigh any costs if it is apportioned correctly. We also have the small matter of the Presidential inauguration on Wednesday that will be the closing of one, shall we say, eventful chapter.

In terms of GBP/EUR we are back above 1.12. We’re around 3% up on the past 3 months. Take advantage of current levels. You can view the movements over the past week in the graph below –

Sterling has struggled to gain a foothold much above 1.12 since May last year. Please get in touch with a member of the trading department and they can lock in some of these gains for you. I do think Sterling is due a further rally higher with Europe having challenges with the rollout of the vaccine, a political crisis in Italy, the replacement of Angela Merkel and their own issues with the departure of the UK. The main event this week for the Euro is the ECB Monetary Policy Statement and Press conference. EUR/USD is coming under pressure so this should translate to an uptick in GBP/EUR. If you have a requirement to sell EUR back into GBP consider implementing take profit orders to the downside should we have any disappointing data out of the UK.

If there is anything specific you would like to discuss around your FX requirements please do get in touch.

Have a fantastic week

written by

Liam Alexander

Liam Alexander is the CCO at Aston Currency Management.

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