This week is all about ‘Super Thursday’ in the UK and the NFP (Non-Farm Payroll) data released from the US on Friday. Super Thursday sounds like a horrific electronic closing down sale where everything must go, people queue up round the corner and then trample on each other to get in to purchase a toaster. Gladly, it’s nothing of the sort.
It will be a volatile day for Sterling as for the first time, the MPC (Monetary Policy Committee) will announce at the same time –
· The August Interest rate decision
· Publish the minutes of the meeting
· Present their latest quarterly forecasts for economic growth and inflation.
Previously, the data had been released separately. Following this we have Carney speaking at the inflation report press conference. This will be the key part of the day in my opinion. How Carney gives his view on the UK economy and brings in a signalling process on when an interest rate rise will occur to avert any shock to confidence will be key. We have to bear in mind interest rates have been at low levels for such a long time that it is the norm for many people now.
The strength of Sterling, particularly against the Euro, will be a consideration and a concern for the Bank of England. The continued downturn in the Eurozone is hampering manufacturing and exports. Are you a Euro buyer? If so, I would consider locking in some of your exposure at current levels. GBP/EUR is near 7 year highs again. If I had offered you 1.40 two years ago I’d suggest you would have booked as many as you possibly could have. Might it go higher? Possibly, although as I keep saying doing nothing is speculating. Come Thursday I think you might see a dip in the value of Sterling and we’ll come off a touch. Please get in touch prior to Thursday and we can cover off some of your exposure for you. If you think the Pound may gain some buoyancy this week and on Thursday consider implementing market orders. Contact myself or one of the trading team to discuss appropriate levels to aim for.
Cable is at interesting levels and trading in a kind of no man’s land. It is lacking any clear direction at present. On Friday afternoon there was a sell off on USD as quarterly US wage growth increased at its slowest pace for over 20 years. In turn, this pushed back expectations for a US Interest rate rise in September so the currency was dumped. Then, appetite for the US Dollar returned with a strong Chicago PMI figure posted that showed the US economy was strengthening on a sustainable path. So, up, down or sideways for the US Dollar? If we have a strong NFP figure released on Friday then we’re going to see appetite return for the dollar. Therefore, if you are USD buyer and need to do something this week I would consider locking in your requirement prior to Friday and perhaps before Thursday. I’ve said before that I think anything over 1.55 should be considered a good level to secure in the current market. USD seller? Stagger orders at appropriate levels to the downside as we may see a slump in Sterling over the coming weeks so the rate for you to sell USD into GBP will improve. Please contact me directly or one of the trading team to discuss any requirements you have.
This week is shaping up to see some substantial movements in the currency markets. Please get in touch and we can discuss a strategy with you that will cover the summer months at least.
Any questions please do let me know.
Have a great week.
Written by Liam Alexander