Is the EUR in for another bout of weakness? European leaders will meet in Brussels this week to try and ‘restore’ investor confidence in the Eurozone area. I’m not sure ‘restore’ is the correct word. Did anyone at any stage feel truly confident that the woes of the Eurozone had ever disappeared? I don’t believe so. The strategy of concentrating on the fiscal deficit targets has not brought the recovery they expected. Indeed, a change of tact is required. With European stocks taking a hammering last week, the economy stagnating, and structural reform still a long way from coming to fruition we will hear the usual noise of “we’re doing everything we can to tackle the crisis”. The ECB will continue to ‘talk down’ the EUR and we’ll see EUR/USD drop off again. There has been a push higher in recent trade on EUR/USD however I will stick with my forecast that EUR/USD will be under 1.25 by year end. This in turn, will give GBP/EUR the impetus to push higher again.

What level will GBP/EUR reach in the next two months? I think a push to 1.29 is achievable although that is a toppish estimate for year end. I would stagger orders at 1.27/1.2750 over the next few weeks. I don’t see a huge shift higher in the next week or so. We don’t have any data of significance out of Europe this week. Should some comments come out of the meeting in Brussels that are construed as negative then we may see a spike higher. I think this is a strong possibility. Please contact myself or one of the trading team to discuss implementing orders at an appropriate level. Should you be able to achieve 1.27 then you are well set for the rest of the year.

What of GBP/USD? Which way is it likely to go? I still maintain a downtrend will resume however cable is battling hard around 1.60. I will stick to my forecast that we’ll be around 1.55 by year end. Sterling will meander along as I don’t see much upside or downside. It looks very stable to me and not open to any significant shifts in either direction. The Dollar will be the main mover in the next two months. Even though it has had a strong surge in recent times I still see further and continued strength for the remainder of the year. Of course, there will be dips higher and lower although I expect a push lower to resume. If you are a USD buyer if you can lock in 1.60 you will be achieving ‘fair value’ on GBP/USD.

Dollar seller? Place market orders at 1.60 and 1.59 to execute at. Contact our trading team to discuss.

What data do we have out this week? As stated above nothing that is going to directly impact the single currency. On the Sterling front we have the MPC Vote and the Bank of England minutes released on Wednesday morning. Thursday we have Retail sales out of the UK and to round off the week we have the GDP figure. I expect a mixed bag so I don’t see Sterling shifting significantly in either direction. Should however the figures prove favourable then expect GBP to push significantly higher. Our friends from across the pond? They have inflation data out in the form of CPI (YoY) (Sept) on Wednesday followed by jobless claims and home sales data on Thursday.

Predictions for the week –

GBP/EUR – Higher

GBP/USD – Lower

EUR/USD – Lower

Please contact one of the team to discuss your strategy for the remainder of the year. If you have any questions or would like to have a discussion on your individual requirements please let me know.

Have a great week.

Written by Liam Alexander