The October temperatures are starting to drop, coats are being brought out the wardrobe and the question of “is it cold enough to wear a scarf today” comes around again. An important issue I’m sure you’ll agree. So, onto this US debt ceiling/Government shutdown/financial Armageddon/US dollar stuff. We’re around the 1.60 level on GBP/USD with no clear direction. Traders and investors are staying clear of positions and this coupled with reduced data releases due to the on-going US situation means we’re pretty directionless. A short term debt limit increase to stave off default has been offered by the republicans giving another 6 weeks to come to a full agreement. The political impasse continues, however it seems that progress is being made. So, what does this ‘half deal’ mean for the US dollar? Traders will continue to look for news flow out of Washington however again we have the postponement of key data such as Retail Sales that were due to be released today. The US Dollar is very much at the whim of political discussion, commentary and any resolution (or lack of) that comes from Washington. I would look to place orders to purchase USD at 1.60 today. Contact one of the traders to implement this. You may see some developments over the course of the weekend and if there are then when the market opens late Sunday evening (UK time) you may be best placed to take advantage of this. Your order will fill automatically. I still favour GBP/USD to the upside over the rest of the month as the shutdown in services continues in the US.GBP/EUR? We’re back under 1.18 now. If you can cover off some of your exposure at this level you’ll secure at a good rate. If you look at the below graph on GBP/EUR for 2013 you can see that although 1.18 isn’t at the absolute top we’ve been as low as 1.1442 this year. The high has been 1.2338 back on the 4th January. Do I think we’ll get back to the 1.23 level this year? Nope. 1.20 again? Yes, I think that’s an achievable level however like last time there will be a lot of resistance at this figure. I would look to stagger your orders at 1.18 and 1.1850 to purchase EUR over the coming weeks. If you’re looking longer term place at 1.19 and 1.20. Best to look at getting these implemented in advance and it’s one less thing to worry about.

GBPEURgraph

What data do we have out today? Not too much. We had some UK data out this morning however nothing of real note. Sterling largely unchanged. We have an FOMC member Powell speaking in the US later this afternoon however with the shutdown in non-core services in the US we’re light on data today. I don’t expect too much movement this afternoon and we’ll see some range bound trading with GBP/USD moving in a 50 pip range. EUR/USD is floating around in no man’s land at the moment. 1.36 or 1.35? I’d suggest 1.36 is more likely on some USD weakness. Dollar sellers? Look at 1.5950 as a level to execute at and take advantage of any pullback on GBP/USD.

If you have any questions or would like to discuss a particular topic please let myself or one of the team know.

Have a fantastic weekend.

Written by Liam Alexander