The Euro has been given a good old booting from pillar to post after the ECB press conference on Thursday. Much like the Northern Hemisphere teams at rugby.
Draghi and the Governing Council stated “the degree of monetary policy accommodation will need to be re-examined” at December’s meeting. The dovish theme continued, with the phrase the ECB have used more often over the past 5 years than the sun has come up in the morning - they are “willing and able to act”. In short, they’ll do what is necessary to get inflation a tad under its target rate of 2%. This will of course mean they’ll need to amend the current Quantitative Easing program. What did all this do to the Euro? The Euro crashed against the US Dollar retreating from levels above 1.13 to around 1.1050. The tumble continued on Friday with EUR/USD printing just under 1.10 the figure.
With the drag lower in EUR/USD this did of course translate to a significant shift higher for GBP/EUR. Indeed, the pair reached the highest level in a month just under 1.39. We traded a tad north of this level on Friday although it looks like it is pausing for breath. Are we going back to 1.40? It looks increasingly likely. Do you have a requirement to purchase Euro’s? Please do contact myself or one of the trading team to discuss implementing market orders around 1.40 the figure. The landscape has now changed and the Euro is on the back foot. I would consider thinking about your exposure for Q1 next year in addition to covering off the next couple of months requirements.
We have numerous data releases out next week that are likely to impact the Euro this week. We have unemployment data out of Germany on Thursday followed by inflation data in the form of the Consumer Price Index (YoY) (Oct).
We printed a high of 1.5509 on Cable last week although the trend has turned bearish and we had the 1.53 level to the downside pressurized in the US session on Friday. Will we head to 1.55 or 1.50? Contact the Office and we can discuss various scenarios with you and implement a strategy that is tailored to your specific requirements. If you are a US Dollar seller I would look to stagger market orders to the downside to take advantage of the move lower. Dollar buyer? I would consider looking at covering off some of your exposure on a SPOT basis. If we go back under 1.50 what does that do to your bottom line? Data out this week that is likely to affect Cable is GDP (YoY) (Q3) out of the UK followed by Durable Goods orders (Sep) and Consumer Confidence (Oct) on Tuesday and then the Fed Interest rate decision on Wednesday. I think we can pretty much guess that’s a non-event although as the Chuck Berry lyrics go “you never can tell”. December may be interesting on the interest rate front although most are looking at Q1 ’16.
If you have any questions, general musings or simply want to disagree with me on the above please do let me know.
Have a great week.
Written by Liam Alexander