GBP/USD has settled into a range of late and I don't see that range being much further broken to the upside now. If you can secure at these elevated levels for Q1 next year I would suggest it would be worthwhile. A number of companies price their own contracts anywhere from 1.55-1.60. If you can lock in at the levels we're currently trading at you're locking in a currency profit for Q1 next year and giving yourself one less headache to concern yourself with when back at your desk beginning of January. Let's face it, the alcohol induced headache will be enough to contend with! Send myself or one of the trading team an email or give us a call and we'll discuss what best suit your needs. It may be a mixture of Forward contracts, OCO's (One cancels other)and Spot contracts.Where do I think GBP/USD is going Q1? I would suggest it may drift off slightly once the US finally decide to initiate tapering. Stock markets have been mainly rising due to funds being put back into the economy by the Federal reserve. As the U.S. job market slowly recovers the need for these additional funds becomes less and less valid. They'll look to start slowly tapering the amount that is in the system. In previous scenarios/rumours of this happening, the market/investors have become nervous and jittery and then everyone looks to go back into the US Dollar as the safe haven currency of choice. The result? USD strength. We could quite easily see GBP/USD back under 1.60 in the first quarter of next year. Could we see the recent bout of Sterling strength continue in Q1? Perhaps. 1.70 on GBP/USD in Q1 next year? I'll eat my hat if it reaches that level. That comment may come back to haunt me however I would be extremely surprised if it does.
Aussie Dollar has been in focus this week. Technically speaking, it's been given a good kicking. It has lost 300 pips versus the EUR. If Armageddon occurred the EUR would probably still shrug it off the resilient bugger that it is. Against Sterling, Aussie Dollar has lost 250 pips. If you sell GBP to purchase AUD we're at extremely favourable levels. That's a bit of an understatement actually. We're at the best levels since 2010. Why? Quite simply, too much inflation, having to cut interest rates and China having decided to cut back on the purchase of natural resources. The Australian central bank would rather have a weaker currency than extremely low interest rates going forward. Thinking of escaping the winter weather here for the Gold Coast? May not be a bad time to visit Australia.
GBP/EUR? We've retraced back below the 1.19 level. The 1.20 level is indeed sacred ground that is tread upon a few times a year it seems. I would now suggest looking at implementing market orders at the 1.19 level to purchase EUR. This level is realistic and you should be able to achieve this at some point in December. I would then look to 'average up' your rate and stagger your requirement at different levels, should you be of the opinion the EUR is in for some weakness and data out of the UK is going to continue to be strong. If so, look at 1.1920 then 1.1950 as your levels after 1.19.
We are very light on data out today so not much to report on that front and I don't expect much volatility at all. I'd expect range bound trading. If you have a requirement next week it may be an idea to put some market orders in over the weekend as there will be some movement in the overnight Asian session prior to us getting to our desks for the London session.
I'm sure some of you will be nursing hangovers today from the first round of Christmas parties. I'm sure this will be the case for the next week or so for the majority. Should anyone find themselves in the Knightsbridge part of the world do let us know and we may help contribute to that sore head.
Have a great weekend
Written by Liam Alexander.