ACM Update Tuesday 6th October 2020

“Circuit breaker” is the latest term to be added to the dystopian year of 2020. Will there be another UK lockdown in the coming weeks to add to the continuing joy of this year? Unfortunately, it is looking increasingly likely.

Sterling broke through 1.30 against the dollar in the Asian session to print three week highs with renewed hopes of fiscal stimulus in the US. A slight bias to the upside remains short-term. You can view the movements in the graph below –

Market sentiment is generally buoyant today although like political decision making it can change course very quickly. If you have a requirement to purchase USD from GBP consider implementing take profit orders at 1.30 the figure. If you can achieve this figure over the coming weeks I would suggest covering off a large percentage of your exposure on either a SPOT or Forward contract basis. Could we potentially move significantly higher to 1.35 should there be a deal struck between the UK and EU? Yes, of course. However, Sterling could quite easily end the year in the low 1.20s. Please get in touch with your point of contact at Aston to discuss a strategy for the remainder of Q4. We have the Fed Chair, Jerome Powell, speaking today and we should know more on any potential additional $1.5 trillion stimulus. Wednesday we have the FOMC minutes This will impact USD so if you have an immediate requirement get in touch with the team today.

From a European perspective equities are higher this morning and EUR is slightly firmer against GBP. We are trading around 1.10/0.9090. We have the ECB president, Christine Lagarde, speaking today and tomorrow. The ECB are monitoring exchange rate movements with some concerned about EUR strength although to date there has been no intervention. Lagarde is likely to provide further outlook on the Eurozone recovery and fiscal and monetary policy. If you have a requirement to move into GBP from EUR consider implementing take profit orders to the downside as we may see a move higher in EUR/USD that will drag GBP/EUR lower, although not substantially.

 

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

Sterling/Euro will of course be largely driven by Brexit negotiations and news flow. Please make sure you have a conversation with our trading department to discuss technical levels. They can tailor a strategy around your specific requirements so you mitigate your downside risk over the next few months. Please feel free to get in touch with them directly or if you would like one of the team to reach out to you let me know and I can certainly put that in place for you.

Enjoy the rest of the week and any questions please feel free to let me know.

written by

Liam Alexander

Liam Alexander is the CCO at Aston Currency Management.