Planning a holiday over Easter? New York wouldn’t be a bad choice. Sterling has continued its recent gains against the US Dollar with a 2% jump last week. We’re now at levels not seen for over two years. I think we’re now very toppish on GBP/USD. I expect a retracement back down and I think we’ll be around the 1.60 figure over the next few months. This move on Cable (GBP/USD) is a Sterling move. I maintain the view that we’ll see a sustained bout of US Dollar strength this year. Market attention this week will be on the FOMC minutes with focus on the pace of QE tapering.Have you looked at your exposure on GBP/USD for the next 3 months? At these elevated levels I would look to cover off 75% of your exposure. Might it break 1.70? Possibly. However, as anyone that has looked at Sterling over the past 10 years will know, it seems to have this magical ability to plummet far faster than any other major. I would urge caution on any further upside moves as there will be a number of resistance levels we will need to see broken to make it to 1.70. I would look to work an ‘OCO’ on Cable so that you protect your downside against any sharp moves and look to take advantage of any spikes on an intraday basis. Please contact myself or one of the trading team to discuss appropriate levels to target.

EUR/USD? The EUR really is the most resilient bugger. Fundamentally, the EUR should be nowhere near as strong as it is. EUR/USD has broken through the 1.37 level. I don’t see EUR/USD advancing much further. As mentioned above, I see USD strength being the trend for the rest of the year. This will culminate in EUR/USD being pushed back below the 1.30 level. With it being a US holiday today any moves on EUR/USD are likely to be influenced by the single currency.

GBP/EUR? We’ve stalled on any sharp moves to the upside, for the time being. Why? Well, the markets are in a bind between deciding on a really strong Sterling and a resilient and robust EUR. With the positive fundamental environment in the UK continuing apace I see no reason why we’re not higher on GBP/EUR. I would look to work market orders on GBP/EUR. Once you’ve utilised this trading tool you will see the benefits in using it along with Spot and Forward contracts. With Sterling in positive territory placing market orders will give you the opportunity to take advantage of any spikes during the day and on the overnight Asian session.

We’re thin on the ground in terms of data today with it being a US holiday. Tomorrow we have CPI (YoY) (Jan) released from the UK followed by the ZEW Survey (sentiment) from Germany. Wednesday is a key day for Sterling. I would suggest placing market orders with our traders before end of play Tuesday. We will see a lot of volatility on Sterling crosses on Wednesday morning. We have Bank of England minutes, Claimant Count rate (Jan) and also the ILO Unemployment rate (3M) (Dec). We cross the pond on Wednesday evening for the release of the FOMC meetings from the US. Expect a big day for GBP/USD on Wednesday. Please make sure you have a strategy in place to take advantage of any positive moves whilst protecting your downside risk should the markets go against consensus. Thursday rounds off the week for key data with the focus being on the US. We have CPI data out. The remainder of the week is Tier 2 data that shouldn’t influence the direction of the markets too much.

Volatility has returned to the markets. Please make sure you have your FX strategy in place.

Any questions please let me know.

Have a great week

Written by Liam Alexander