The Greek situation will play out for the next few months before there is anything resembling clarity and progress. Greece are now in talks with the IMF to request a third bailout. We’ll discuss Greece in more detail in the coming weeks as August 20th is the next date that the market will focus on. Athens are scheduled to make a loan repayment of €3.2 Billion to the ECB on that date. Only problem? They can’t currently afford it.
GBP/EUR reached fresh highs early last week although it has since retreated to the downside. I’m bearish on GBP/EUR and I don’t think calls of 1.50 are or ever were realistic. My 12 month forecast at the start of the year on GBP/EUR was to finish up around 1.32. Whilst I think that may be too low and I may need to revise that in the coming months slightly I don’t see it being a million miles off. I would suggest ‘fair value’ on GBP/EUR is around 1.25 and we’re overvalued at the moment. Can the UK contend with Sterling being this strong for another 6 months to a year? I’d suggest not. If you have a Euro requirement until end of year I would consider locking in some of your exposure on SPOT or Forward contracts. If you think we’ll have another move higher please do let me know and we can implement market orders at appropriate levels to the upside. If you can achieve anything over 1.40 I’d suggest that’s a great level to achieve. If you would like to discuss your exposure from now till end of year please get in touch via email or one with one of the trading team.
Over the next few months I think GBP/USD is going to be like one of those football matches that you look at and just know is going to finish in a 1-1 draw. There will be some excitement, some action although ultimately both sides will cancel each other out. If I was to pick a winner I’d suggest the Dollar would be victorious. I’ve been in the Dollar bull camp for a long time and won’t change now. This week will be interesting as we have the FOMC meeting where we may see further indications that may signal a rate hike in September. We also have GDP released from the US (Q2) on Thursday and also from the UK on Tuesday (expected in at +0.6%).
Anything over 1.55 should be considered a good level to achieve if purchasing dollars. If you have an upcoming requirement please do let me know and we can implement a market order for you. If you’re a seller of USD into GBP I would implement orders to the downside as I think the trend will be slightly lower although not by much.
If you have any questions on the above or would like to discuss your current requirements in other currencies please do let me or a member of the Aston team know.
Have a great week.
Written by Liam Alexander