We’re into the UK General election week. Expect insults to increase, final rally cries and a lot of exaggerated hand movements by politician’s whilst making a point to get your vote. Why politicians do that weird thing with their hand to make a point I don’t know. It looks as natural as a bear on a mountain bike. Anyway, I digress.

There isn’t much data out this week so Thursday May 7th will be the day that is important. If you have currency requirements this week and indeed throughout May please contact myself or one of the trading team to discuss a strategy.

GBP/USD

Sterling bounced against the US Dollar last week to flirt with the idea of 1.55. It didn’t quite get a night at the movies. Sterling has since lost ground against the dollar and was on the back foot on Friday morning losing over 100 pips due to some mixed data out of the UK. As you’re probably all bored of hearing now I maintain that cable will come off in the run up to May 7th. From then on we’re into the unknown. The result, good/bleak or otherwise will determine the short term direction on Cable. I would think we’ll drop off prior to May 7th then Sterling will gain ground against the USD afterwards (it’s happened 4 out of the last 5 general elections).

We will look at things accordingly and provide our forecasts for the next 3 months after May 8th. I would suggest if you are a USD buyer I would look at locking in above this level if you have a USD need this week. As I always say, doing nothing is speculating.

The bounce on Cable is largely due to some poor US data (it wasn’t that bad), a slowdown in the economy and the chance that the Fed would delay raising rates. I think the move is overdone and Sterling is artificially high against the dollar short-term. Expect the downtrend to resume this week.

GBP/EUR

GBP/EUR is now on the back foot. All this chat of EUR/USD parity has subsided and the move above the 1.10 level has pushed GBP/EUR lower. Could GBP/EUR push lower? Quite possibly. I said at the start of the year that I thought we’d end up around 1.32 on GBP/EUR end of year and I still don’t think we’ll be far off that. If you are a EUR buyer you’re probably all waiting for another push up to 1.40. I would suggest it would be worthwhile covering off at least 50% of what you have coming up on Spot and Forward contracts. You can always place market orders to take advantage of any moves to the upside. Please contact myself or one of the trading team to discuss.

There isn’t much data out this week and as I said previously the UK election on May 7th will be the event of the week. I think it will be a Conservative majority, the pound will weaken in the run up to the election and then we’ll see Sterling gains afterwards. We’ll then update you with our 3 month forecasts on the majors afterwards.

Have a great week and any questions please do let me know.

Written by Liam Alexander