It is certainly proving to be an erratic and volatile start to the year. Oil prices falling again due to sanctions on Iran being lifted, my dry January being replaced by a semi-arid one, GBP/EUR pushing down to threaten 1.30 the figure, GBP/USD at 5 year lows and match fixing in the murky and dangerous world of Tennis. They must have been paid off in rather large quantities of Pimms and Strawberries.

What does the rest of January look like? I expect volatility to continue with Sterling remaining under pressure. Will there be some respite for the embattled pound? There may be some bouts of relief that may lead to some spikes on an intraday basis although I think any reversals will be short lived. If you are holding US Dollars and need to convert into Sterling I would suggest now is a very opportune time to do so. Please contact myself or one of the trading team to discuss levels to execute at. Do you think Cable pushes lower? If so, implement market orders to the downside to take advantage of further moves lower. If you are a USD buyer are you holding off in the hope that it pushes back to 1.50 or so? If that’s the case then unfortunately I think it will a while before we re-test those levels again.

What do we have out this week that will move GBP/USD? We’re fairly light in terms of data other than the BoE Governor Mark Carney speaking on Tuesday followed by inflation data out of the US on Wednesday. I think it may be a week where some form of range bound trading and normality returns to the market after the aggressive first couple of weeks of 2016. Of course, with geopolitical events shifting the landscape of global markets on an almost daily basis the opportunity for large movements in financial markets remain.

GBP/EUR? I’ve said for over 12 months we would be back at 1.32 the figure after the dalliance with the giddy heights of 1.40 plus last year. I expect a period of range bound trading on GBP/EUR then we’ll see a break through 1.30 the figure. I think we’ll breach that level in the coming month and we’ll then target 1.28. Once we’ve reached that level where do we go? Up or down? I would expect a bounce from that level and we will then settle between 1.30 and 1.40 for the rest of 2016. Of course, as previously mentioned, a ‘Brexit’ will become more of a news story coupled with ongoing concerns on China, EM countries and currencies, Oil prices, deflation, ‘currency wars’ through devaluation of their respective currencies, Middle East tensions so we are still open to a multitude of events that could change the direction of currencies very rapidly indeed. We have the popstar of European Central Banking, Mario Draghi, speaking this Thursday. His speech is likely to move the single currency.

Do you have a strategy in place for the rest of Q1 ’16 and further forward? As I always say, doing nothing is speculating. Contact a member of the Aston team and we’ll tailor a solution specific to your individual requirements. 

If you have any questions please do let me know.

Have a great week.

Written by Liam Alexander