The US Dollar remains soft after dovish FOMC minutes released on Wednesday last week. Indeed, GBP/USD reached monthly highs Friday morning trading just over 1.57 the figure. Will we have a sustained break higher on Cable or will we see a push lower in upcoming trade?

GBP/USD

I think we’re toppish now. I don’t see much further upside above 1.57 for Cable. If you are a USD buyer I would look at securing some of your exposure on a SPOT basis in the coming weeks. We have had numerous attempts to break key resistance levels and they’ve failed to materialise. I’d put the chances of a move back to 1.60 by year end about as likely as Jeremy Corbyn and Donald Trump leading the ‘special relationship’ in coming years.

Yes, we had slightly better than expected retail sales out of the UK and we kicked off the third quarter with a rise although it wasn’t in line with market expectations so GBP retreated. On Friday morning we had Public Sector Finance figures released and we spent less than we received. Expectations were for a figure of -£2.8 Billion and we came in at -£2.1 Billion. Sterling didn’t jump on the back of it and instead dropped off 50 pips. With expectations decreasing for a rate hike in September in the US, inflation lagging, an escalation in the rout in China, a generally weak world economy then we’re going to be in a cancelling out phase so I’d expect further range bound trading to continue with a slight bias to the downside. I would suggest implementing market orders if you have a requirement to convert USD into GBP. Please contact myself or one of the trading team.

GBP/EUR

This may sound absurd with the Greek PM Tsipras resigning and calling yet another Greek election although is the EUR the most attractive currency of choice at the moment? The UK is looking less likely to raise rates as are the US and with commodity currencies being hammered across the board the EUR is seeing a break higher against the US Dollar and Sterling. Indeed, EUR/USD is settling around 1.12 and above and I’d suggest we may see a push back to 1.15. This will drag GBP/EUR lower and we pushed below 1.39 on Friday. My call of 1.32 by year end may prove a step too far although I’d expect GBP/EUR to make further moves to the downside now. Are you a seller of EUR back into GBP? I would implement orders and look to execute around 1.3850 if you have a requirement to purchase Sterling. Please contact myself or one of the trading team and we’ll put these in the market for you. If you are a buyer of Euro then historically you’re still at very good levels. It might have another pop higher and go back above 1.40 again so if you’re looking at this figure as a nice round level to aim for we can put an order in the market to execute here. As I always say, doing nothing is speculating!

Data this week

We don’t have any significant data released at the beginning of the week so range bound trading should continue. We have the Jackson Hole Symposium on Thursday and Friday in the US where Central Bankers and various officials get together to eat sandwiches, drink tea and put the world to rights. There will be a fair amount of topics to be discussed and issues to put right this year. Other than that it is Thursday and Friday that will prove interesting on the data front with GDP annualised (Q2) released from the US on Thursday and GDP (YoY) and (QoQ) (Q2) out of the UK on Friday. Following the UK data release we have Eurozone consumer confidence, industrial confidence and business climate (Aug) released.

If you have any questions on any of the above or have an upcoming requirement you would like to discuss please do let me know.

Have a great week.

Written by Liam Alexander