Is EUR/USD in line for a correction? As I said last week I thought we’d see some bouts of EUR strength and that proved to be the case. We had EUR/USD pick up from the previous week lows of 1.05 and bounce to a range between 1.07-1.09 the figure. I thought the move had been slightly overdone and I don’t think it is going to be a straight line down to parity. I don’t think we’ll reach parity this year even though most are calling it. Perhaps 1.02 as a low and then it’ll rebound.
In saying that however the Greek story will be back in the headlines this week. It’s all been rather quiet on that front of late. Expect to turn on the news tonight and it’ll be back in the headlines. The Greek Prime Minister Alexis Tsipras meets with Angela Merkel in Berlin today to discuss Greece’s debt obligations. The conversation will go something like this “Alexis, we need that money back” “Angela, we need another 1bn to keep us going before we can pay back that 100M to you” “Alexis, ok, one last time, but we’re going to have to charge you interest on top” “No problem Angela, thanks for the loan, we’ll get the money back to you”. And on and on it goes. Can there be a resolution? Germany would have to bow and restructure the entire debt and I’m not sure there is the political will or public support for this anymore. Could Greece go? I think it is looking more likely now although there will be no doubt be an 11th hour reprieve of some kind.
Expect EUR crosses to be volatile this week. Do you have a requirement to purchase EUR from GBP? Yes, it has fallen quite a lot from recent highs of late although it is still a very good level to lock in on a SPOT basis. With UK elections 6 weeks away then there will be heightened risk around Sterling. Indeed, the CBI (Confederation of British Industry) said this morning that they are wary of a ‘power vacuum’ post-election results. Political uncertainty creates confusion for investors. Sterling has come off this morning on the back of these comments.
On the GBP/USD front I see some slight downside for Sterling this week against USD so if you need to sell USD into GBP please let me know and we can look at suitable levels to execute market orders at. I still maintain my view we’ll be around 1.45 around May time.
On the data front this week it mainly originates from the Eurozone and the US this week. We have Draghi speaking today then we go over to the US for durable goods order on Wednesday and then we have the GDP figures out on Friday from the US.
Any questions or if you have any transactions to do please let myself or one of the trading team know.
Have a great week
Written by Liam Alexander