The mornings are getting lighter, the sun is starting to shine, Greece and Germany don’t want to lose face and need to spin a story to their respective publics. Both want to be seen as holding the upper hand, compromises will be made, a deal will be agreed in June once we come to the end of the fourth month extension, both will claim they have got what they wanted, and the Eurozone ‘project’ will rumble on to the next calamitous event. And breathe.
Call me cynical, but that’s how it will play out in my opinion. In between now and June we’ll have to suffer “will there won’t there” be a Greek exit. It’s becoming as interesting as watching reality TV shows.
What has been interesting is the impact on the Euro. It has weakened considerably this year.
Will GBP/EUR hit 1.40? I don’t see too much EUR strength coming into play and with EUR/USD having another move lower this week I’d suggest we’ll see below 1.10 the figure on EUR/USD in March. That may edge GBP/EUR higher still although with the UK General Election scheduled for only 9 weeks away there will inevitably be uncertainty surrounding whom will win and that should see Sterling drift to the downside.
If you are a EUR buyer I would suggest locking in some on SPOT or on a Forward Contract. We were trading around 1.21 a year ago. That puts into context how far the rate has moved in 12 months. Might it go 1.40? Perhaps. Might it drop off? Perhaps. As I’ve said before I think we’ll settle around 1.32 end of year so locking in some of your exposure at current levels may prove fruitful.
On GBP/USD we’ve had a move higher on the back of the US Federal Reserve's Chairman, Janet Yellen’s, testimony earlier in the week although the move has since slighty dissipated and we’re now back on the ascendency with the US Dollar. I think it’ll move lower through the EUR/USD move in addition to the UK elections and a general market bullish stance on the USD. If you need to purchase USD please send me an email. If you’re a seller of USD I would suggest staggering levels to the downside. Please contact me to discuss appropriate levels to aim for.
There are some key events to look out for this week that will affect Sterling, Euro and USD. Today we have Eurozone CPI data released and towards the end of the week we have the BoE Interest rate decision and the ECB interest rate decision with the Press Conference afterwards where Mario Draghi will be speaking. As always, expect volatility surrounding these events. The week is finished off with the release of the US's NFP figure (Non-Farm payrolls). If better than consensus expect GBP/USD to move lower.
As always, please do let me know if you have any questions on anything.
Comments/criticism/praise are all gratefully received, not in equal measure, but gratefully received nonetheless.
Have a great week.
Written by Liam Alexander