Dollar weakness is the theme this Monday morning. With the NFP (Non-farm payroll) figure disappointing on Friday EUR/USD has been supported and has now pushed back above 1.36. Do I think this upward move will continue, and that of dollar weakness in general? No. We may see some disappointing macro data out of the US in the coming months so short term it is possible we could test highs on EUR/USD and also cable (GBP/USD). However, I think this will be short lived. Why? The FED will continue to taper its bond buying programme and this will lead to dollar strength. I said at the start of the year that I expect GBP/USD to be under 1.60 this year and I still maintain that view. If you’re planning a shopping trip to New York now may not be a bad time to do so.Should I buy USD against GBP now or should I wait and see if it goes up? I would suggest that you should look to cover off at least half of your exposure now on GBP/USD. Why? As someone once told me “doing nothing is speculating”. Might it continue climbing higher and target 1.66 or even 1.70 again? It may indeed do so however it may also drop below 1.60 just as quickly. If you do believe, and I think there is a good opportunity short term that GBP/USD may continue the uptrend, then place a market order at a level you think we’re going to get to. This way, should GBP/USD spike higher on an intraday basis then you’ve taken advantage of the move. If you don’t have anything in place then you don’t have any way of taking advantage of upwards moves or protecting yourself from any sudden downtrend due to either poor UK data or strong US data. Please contact myself or one of the trading team to discuss a strategy on GBP/USD for the remainder of Q1.

GBP/EUR? Well, we’re back to range bound moves. To say it’s exciting would be like saying Manchester United are playing well. It’s not and they aren’t. I would look at covering off EUR purchases at 1.20 and as a push 1.2050. I think we’re going to bounce between 1.1950 and 1.2050 for a while (yawn) unless we see some poor data out of the Eurozone this week. There may be a capital shortfall by Italian Banks of some 15 Billion EUR, however they’re confident of passing the stress tests. Go figure. For these stress tests to be credible some banks have to fail and be consigned to history. That’s a discussion for another time however.

What do we have out in terms of data this week? Nothing of note today and only key event tomorrow is the Federal Reserve’s Yellen speaking. Wednesday we have Bank of England Quarterly Inflation Report (Q4) and also the Bank of England Governor Carney speaking. His European counterparty, Mario Draghi, the ECB president, is speaking at 15.30.

Thursday is of course the most important day of the week. No, it has nothing to do with Valentine’s Day ladies. We have employment data out from our friends down under in Australia that is going to be pivotal for Aussie Dollar. It has had a slight recovery in recent trade however it is still vulnerable to further falls. I expect AUD to remain weak in 2014. Out from Germany at 7am we have CPI data released that will affect the EUR and we then have the release of the ECB Monthly report. Expect volatility first thing Thursday morning on EUR crosses. Please make sure you have implemented Market orders by Wednesday evening. Going into Thursday afternoon our friends across the pond release the Retail Sales figure (MoM) (Jan) that will give us some direction on the US Dollar in the short term. Rounding off the week from a data point of view we have the release of the GDP figure (QoQ) (Q4) both from Germany and then the Eurozone as a whole.

As you can see there is a lot of data released this week. If you haven’t discussed what you should be doing from a currency perspective then please get in touch and we’ll implement a strategy for you that best suits your individual needs.

If you have any questions please let me know.

Have a great week

Written by Liam Alexander