The day of the 14th February has passed for another year and the day of champagne, reflection, appreciation, hopes and dreams is over for another year.
Nope, not Valentine’s day. The meeting of Greek officials and the country’s creditors over the weekend. With talks at a stalemate last week we have a meeting of the Euro area finance ministers in Brussels on Monday. Will there be a write down of Greek debt? It’s about as likely as Scotland winning the Six Nations now (read that as not very if you’re not a rugby fan). Will there be an extension to the maturity date of repayment and a repackaging of Greek debt and a reduction in interest costs? Quite possibly. Will it mean Europe is in a stronger position than it was six/seven years ago at the start of the debt crisis? Nope. Discussions/noise and “doing whatever is necessary” will continue. Expect us to be having the same debate in a year’s time. The only thing that may have changed is a focus away from Greece to Spain or another Southern European economy.
GBP/EUR? Those of a certain vintage will remember the singer Yazz and I’m sure you’ll remember the song. Yep, that’s it - “The only way is up”. I would caution however that I don’t think it is going to be a straight line move. I’d expect some EUR strength to come back to the table through a EUR/USD move drifting slightly higher. If you’re a EUR buyer I would look to secure at current levels on SPOT or should you think it is going higher please do implement market orders. Please get in touch with me to discuss appropriate target levels to execute at. As I’ve said numerous times before, doing nothing is speculating. At current levels you are at multi year highs.
GBP/USD? After Carney’s hawkish inflation report last week Sterling popped higher against the dollar. Mark Carney said that although he would cut rates further if needed there was an upgrade to UK growth and wage forecasts. This gave Sterling the catalyst to break a few resistance levels to the upside. It has moved a little higher than I thought it would so if you are a USD buyer you may wish to consider securing USD on a SPOT or Forward Contract at current levels. Think this is the start of a move to the upside for Cable? Please contact me to discuss placing market orders to the upside on Cable.
I maintain my view that GBP/USD will trade under 1.50 this year and of course there will be peaks and troughs in trading. As always, no matter the currencies you have an exposure to you have to have a strategy in place to mitigate your risk. One strategy may be covering off 50% of your 3 month exposure on Forward contracts, leaving 25% open for Spot purchases and then utilise market orders for the other 25% to the upside. Please contact myself or one of the trading team to discuss a strategy that suits your individual requirements.
Currency markets this year are proving to be far more volatile than last year. With the Swiss National Bank move earlier this year there will be more surprises I am sure in store for currency markets and erratic price movements. We are here to assist with your currency management so no matter the enquiry please do let us know.
Have a great week.
Written by Liam Alexander