‘Super Thursday’? It turned out to be the exact opposite for Sterling. It was as super for Sterling as I imagine it would be being stuck in a room with the cast of Big Brother for 24 hours. With markets expecting two or more MPC (Monetary Policy Committee) members to back an interest rate rise Sterling dived 0.75% against the Dollar with only one MPC member backing a rise.
The dovish tone signaled a change of direction for Cable. I’ve maintained GBP/USD will push lower and with Retail Sales out on Thursday from the US this release may push Cable lower still. Granted, Retail Sales in the US have largely disappointed this year although a positive figure will give further momentum to the Dollar bulls. With a strengthening employment outlook this has boosted the likelihood of the Federal Reserve raising interest rates in September. If they do then you’ll see further USD strength.
Are you a USD buyer from GBP? We are currently trading under the 1.55 level so I would look to protect yourself against any further downside moves. Sterling and the US Dollar are the two currencies of choice for the market against currencies like NZD and AUD as well as the embattled Euro. If I had to pick a winner between GBP and USD it would be the Dollar. Therefore, I would consider mitigating some of your risk by purchasing a percentage of your USD exposure on a SPOT basis for now. Should we see a spike on GBP/USD I would consider covering off a larger portion at 1.55 the figure on a Forward Contract basis. Please contact myself or one of the trading team to discuss.
USD seller? Implement market orders to the downside at 50 pip intervals. I would look at 1.5450 being a realistic level to aim for this week and then stagger further orders at 1.54. Should you have a requirement to convert USD into GBP please contact one of the team at Aston and we’ll put this in place for you.
We were over 1.43 and tried to test 1.44 the figure although we failed to breakthrough that resistance level. Where now for GBP/EUR? We are on the back foot largely in part due to Sterling weakness due to the aforementioned disappointing ‘Super Thursday’ outcome.
The data calendar is light at the start of the week so I expect movements to be limited with range bound trading. Thursday and Friday are likely to be the days that bring some volatility with the ECB meeting on Thursday and Eurozone CPI and GDP released on Friday. Are you a Euro buyer? I’m sure you’re thinking “it’ll move back higher again”. It might well do, although of course one could argue that the Euro has been hammered enough and some respite may due to be in play for the single currency at some point. My point is there is no point speculating. If you can achieve over 1.40 and you have a requirement to purchase Euro I would look at locking this in.
As always, any questions please do let me know. If there are any particular currency pairs you would like us to discuss please let me know and we’ll endeavour to cover them for you. Alternatively, contact one of the trading team and they can discuss a strategy specific to your requirements.
Have a great week
Written by Liam Alexander