On the overnight Asian session we’ve seen GBP/USD push up to print fresh highs of 1.5959. The psychological level of 1.60 is now in sight and I’d expect a push beyond that in upcoming trading sessions. The resignation of Lawrence Summers from the race to be the next Fed Chairman has weakened the US Dollar as Summers is a hawk and was expected to tighten monetary policy. He’s been replaced as the front runner by Janet Yellen who is more in the mould of the present incumbent Ben Bernanke and monetary policy is therefore expected to remain loose.Overnight EUR/USD hit a fresh two week low with the US Dollar falling against all of its G10 counterparts. All eyes this week will be on the upcoming FOMC meeting where the stimulus package is due to be scaled back with asset purchases being reduced from $85 billion to $75 billion. The benchmark interest rate is expected to remain close to zero as long as the unemployment rate is over 6.5% and inflation is less than 2.5%. The FOMC meeting begins tomorrow (16/9/13) and will last two days. This is one of the main events this week to look out for and we’ll see a lot of USD volatility this week.
Look to place market orders at 1.60 if you’re a USD buyer as I expect us to now push through this level with a next resistance level at 1.6035 so once we’ve broken 1.60 the figure we’re likely to see a retracement back into the 1.59s unless we see a sustained break higher. Contact myself or one of the trading team to place this in the market for you. Do you have the ability to book forward? If you do, I’d look at locking in a percentage of your upcoming requirement on a 1 month – 3 month forward. If you’d been offered 1.57 three weeks ago you would have locked in as much as you could have when we were trading around the 1.53 level.
This morning we have Mario Draghi speaking. Draghi will likely stick true to form and remain dovish therefore capping any rallies in the EUR. Will EUR/USD break 1.34? Only on USD weakness, I don’t see much in the form of EUR strength (Finally!) I expect EUR/USD to be toppish around 1.34 the figure and we should see downside on this pair over the second half of September.
GBP/EUR? If you’re a buyer of EUR from GBP I’d suggest you look at covering some off on a ‘Spot’ basis and if you have capacity to do so look at forward contracts out on a one month and three month basis to offset your risk and lock in the advantageous levels we’re now trading at. Do you think we’ll break 1.20? If so, look at a market level at 1.20 the figure on a GTC basis. Contact me to discuss or one of our traders to look at your GBP/EUR strategy. We have the ZEW survey out of the Eurozone tomorrow that is likely to provide some volatility. It may be an idea to put an order in later today with us and should we spike on GBP/EUR on an intraday basis you’re in position to take advantage and secure the rate you’re looking for.
We have quite a lot of data out this week and we’re likely to see a lot of movement. If you have transactions to make this week give us a quick call to see how and when is best to execute on a variety of currency pairs. We have UK data out tomorrow morning at 09.30am with the release of the Consumer Price Index (YoY) for both Jul and Aug and on Wednesday we have the Bank of England minutes released so will be interesting to hear the detail. As alluded to earlier, Wednesday afternoon (UK time) will dominate the currency markets this week with the FED interest rate decision and their meeting giving us a better idea of where certain currency pairs are likely to be moving short to medium term.
This week is likely to be hectic in currency markets with GBP, EUR and USD set to move significantly.
If you have any questions whatsoever or would like us to discuss your strategy in more detail please let myself or one of the trading team know.
Have a great week
Written by Liam Alexander