The main focus of the currency markets this week will be the FOMC minutes released on Wednesday. From a Macro perspective we’re light on data this week. However, there will still be the capacity for volatility. The US Dollar continues to come under pressure even though the majority of data releases have been strong (think the strong jobs report etc. last week), with the exception of the poor GDP figure. Yellen’s comments last week suggested that the Fed was in no rush to hike rates so we haven’t had any kind of support for the US Dollar. Will that change or will the US Dollar continue to weaken? As I’m sure most of you are aware GBP/USD continued its upward push last week to near 6 year highs. Will GBP/USD continue higher? I believe in the short-term that it will. If you are a dollar buyer please look to place market orders at specific levels to take advantage of any intraday moves. Please contact me to discuss. As we delve further into the summer months range trading comes to the fore with less liquidity in the market so there is potential for sideways moves rather than any sustained change of direction. However, I do expect GBP/USD to push higher so please try and take advantage of any spikes. Are you on the other side and looking to sell USD? It may be time to dust off the tin hat. As alluded to above, I think we’ll see GBP/USD push higher in the short term although I still believe we’ll see some US Dollar strength later this year. It may be a bumpy road for USD sellers up till the end of the year however I do think we’ll see some USD strength this year.GBP/EUR? I believe (FINALLY) that we’re approaching some kind of a reality check on GBP/EUR. The single currency has been markedly overvalued for numerous years now. I think Sterling still has some more gas in the tank as it were. I would look to place market orders to take advantage of further upside momentum. Please contact one of the Trading team or I to discuss. Longer term I think the EUR will continue to underperform against both the US Dollar and Sterling as the Eurozone recovery continues to lag behind the UK and the US and we’re likely to see rate hikes in the UK and US well before we see them in the Eurozone. Outside of this, data short term points to a continuing struggle on the recovery front in the Eurozone. We had disappointing German Industrial Production numbers out this morning showing a 1.8% month on month fall in May which is the third consecutive monthly drop. It shows that although the German economy can weather most storms in the Eurozone it is still not immune from outside influences that can affect order books such as geopolitical conflicts/slowing emerging market economies like China and other risk factors.
What do we have out this week in terms of data? It’s pretty much non-existent today after the Eurozone data released earlier. Tomorrow we have some Tier 2 data out of the UK in the form of Industrial and Manufacturing numbers. In the afternoon across the pond we have the first of many Fed speakers this week. Any surprise comments in any of the speeches will be seized upon and may shift the US Dollar in particular. As suggested above, the Fed minutes at 19.00 UK time is the event of the week and one market participants will be focused on. Thursday we’re back to the UK and the BoE Interest rate decision which is pretty much a non-event these days so don’t expect any sharp movements around the release however there will the usual volatility around it should anything surprise.
If you have a requirement on SPOT/Forward Contract or Market order basis please let me know and one of the team will be happy to assist.
Any questions please let me know.
Have a good week.
Written by Liam Alexander