So the seasons turn, the winter coats are dusted off and the winter boots are put on. It happens every year. So it would seem does Sterling and its dalliance with the 1.20 level and above against the EUR. Remember around this time last year? We were trading at 1.2437 on 22/11/12. We were trading at the beginning of January 2013 at a level of 1.2340. By the end of January? We were just above 1.15. We’re now making inroads into the 1.20 level again. The point I am trying to make? Historically (By that I mean since 2008 when the ‘crisis’ began) GBP/EUR tends not to hang around above 1.20 for a long period of time. Do you have a remaining EUR requirement for 2013? If so, if we can secure 1.20 for you I would suggest, and it’s only a suggestion, that you look to cover off your exposure at these levels. Could it go higher? It may well do. However, with no real weight behind Sterling it may well be the case that we’ll see GBP/EUR head lower first. If we can find some support above 1.20 and settle above there for a week or two I would then suggest looking at the 1.21 level and then 1.22.What’s on the calendar today for GBP/EUR? We’ve had better than expected IFO data out of Germany. It’s what we already knew. Germany are on the right path and growth expectations are about right. EUR had a slight bounce on this data pushing us back to 1.1980 levels. EUR/USD drove up and through the 1.35 level again so I expect today to be very much a yo-yo on these two currency pairs. GBP/EUR to try and push above 1.20 and stay there. EUR/USD to push above 1.35 and try and stay there.
How is GBP/USD doing? Well, Sterling has proved quite robust of late. The comments from BoE Policy maker Spencer Dale that Britain’s economy has “turned a corner” proved a catalyst for some GBP strength. We’re expecting next week for reports to show that growth accelerated in the third quarter and that house prices grew for the 7th month running. I would suggest this will keep Sterling supported for now. Where are we on GBP/USD? We’re hovering around the 1.62 level. I’ve said this numerous times before however if you can achieve 1.60 or above on GBP/USD I would look to lock in your purchase of USD against GBP at these levels. We can do this on a Spot or Forward Contract basis. Alternatively, if you think GBP/USD is going to continue to climb but want to protect against any sudden downtrend then you can utilise an ‘OCO’ with us. Please contact me to discuss.
Seller of USD back into GBP? Dependent on your time constraints I would look at placing orders at 1.6150/1.61 and then 1.60 should we see any disappointing data out of the UK next week.
A quick question. Have you started to look at budgets/cost levels for your business contracts next year? What exchange rate are you looking to price your contracts at? Evidently, you need to price them at such a level where you remain competitive whilst giving yourself enough ‘margin’ to hedge against exchange rate fluctuation. There are a number of options open to you where we can assist you with hedging your currency risk for 2014 meaning more profit for your business. Let’s face it, Foreign Exchange is a headache for the majority. We’re here to simply take that headache away for you.
If you would like to discuss the above please feel free to contact me directly or a member of our trading team.
Have a fantastic weekend.
Written by Liam Alexander.