This is the last full trading week of 2014. Where has the year gone? Prior to the arrival of Santa Claus we have a busy week ahead on the data front that will give us volatility on GBP, EUR and USD. I am sure thoughts are now turning/turned to the festive season and getting things in order on that front. Shopping/disrupted travel plans/family arguments, the joys of the festive season. All joking aside I’m sure many of you are now winding things down. This last week has a full calendar though so expect some interesting movements prior to the subdued currency movements over the next couple of weeks. If you have any currency transactions to do please send me an email.
GBP/USD? The downtrend has been curtailed for the time being due to year-end profit taking mostly. Traders are settling positions hence the move higher on Cable. I’d expect after this for the downtrend to resume on Cable and as I’ve mentioned numerous times I’d expect the 1.55 level to be broken end of year/beginning of Q1. Dollar strength will come to the fore once again and this week we have the FOMC meeting. Should economic projections/forecasts/macro data prove robust coupled with a hawkish press conference then we should see USD benefit. If you are USD buyer you may want to lock in some/all of your exposure this week for Q1 next year as we’re trading at favourable levels compared with where we’ve been in the past few weeks. On the other side, if you are Dollar seller, send myself or one of the trading team a message as you’ll be in a good position over the coming days/weeks to work a market order.
We have UK data out tomorrow in the form of inflation data (CPI) as well as Bank stress test results and our favourite Canadian speaker, Mark Carney. Expect movement on Sterling tomorrow morning. If you would like to implement a market order prior to Tuesday contact one of the Aston team. I think UK data will prove, overall, positive. This should give the Pound a boost. I still expect the market to take the US data as more positive hence my thoughts that GBP/USD will drop off again. On Sterling/Euro though I expect us to push higher.
What level do I think GBP/EUR will reach? If you are thinking of your exposure for Q1 next year ask yourself this: Am I better off at current levels now than last January? The answer to the question if you are a EUR buyer is yes for those that wanted to know. We were trading around 1.19/1.20 in January. If you could have achieved 1.25 then you would have been overjoyed. I would look at anything over 1.25 going into Q1 as a good level to achieve and to work from. I do think we’ll go higher so if you have some time and aren’t in any rush to secure your currency look at placing market orders at 1.2650/1.27. This will allow you to take advantage of any spikes over the festive period. As liquidity in the markets drop substantially over this period any news, expected or unexpected, has a greater impact on movements and can shift the currency markedly higher on an intraday basis. Think we’ll reach 1.27? Please contact me to discuss.
I think the Euro will be in for a rough time early next year. It does have the uncanny wherewithal though to deflect bad news and fundamental problems that would have severely impacted other less robust currencies. We have survey data out in the form of ZEW from both the Eurozone and Germany tomorrow. This is about it in terms of data from the Eurozone for this week.
So, if you have anything to close out on the currency front please do get in touch this week. Enjoy the last week before Christmas chaos ensues.
Have a great week.
Written by Liam Alexander