Sterling has taken a bit of a beating this week slipping against both the USD and EUR after disappointing CPI/PPI data released Tuesday morning, this was followed by poor retail sales figures Wednesday morning. GBP/USD fell from the high 1.51's to almost dipping back below 1.50 before recovering towards the end of the week, back over 1.51. This move provided a great opportunity for USD sellers to lock in rates at levels I would expect to be near the lows for the year. It is moments like these where orders and forwards are really useful to enable you to take advantage of rate movements. Speak to one of our traders if you would like to know more about currency hedging and strategies to help secure your profit or protect yourself from adverse rates movements.The pressure does seem to be on Sterling at the moment especially as it is an unpopular currency for investors and traders. It had some slight relief yesterday with the positive GDP figure confirming the UK had avoided a triple dip recession. Mario Draghi also had some rare words of positivity for the UK economy saying that he sees "encouraging signs of tangible improvements", as always it is filled with non-committal rhetoric. Is the UK really recovering, probably not, I still feel we will yo-yo between growth and recession until the government gets a handle on the real economic issues affecting the country.
Ben Bernanke's testimony in front of the joint economic committee on Wednesday afternoon caused volatility as he confirmed he had no plans to curtail the FED's current scheme of QE any time soon. The markets lost it's mind overnight as Japan saw wild moves not seen since the tsunami in 2011. Unlike in 2011, when there was a genuine reason for the volatility, yesterday's moves were caused by comments that we have seen time and again over the past year. Unfortunately in the current climate, sentiment is driving trading and speculators are convincing themselves on strategies via the comments of economic leaders. Bernanke was thanked an awful lot by the members of the committee for his work leading to speculation that he will be leaving his post once his term is up at the start of 2014. It certainly feels like the markets could do with a fresh perspective and I look forward to seeing what measures Mark Carney will bring to the table once he begins his stewardship of the BofE.
JPY has seen a nice bounce back in the last few days strengthening quickly against the well known large short position that has been in the market since the turn of the year. It has strengthened around 2% against the GBP, EUR and USD since the early hours of Thursday. I would say this a good opportunity to secure your rate if you sell JPY as we are likely to see the rate weaken again once the BofJ announce their next round of stimulus measures, long term the rate is only going one way, until the BofJ are satisfied that the measures have had the desired effect on their economy. Take advantage of this dip with a limit order and try and catch the recent lows on offer.
Another currency in the news this week was the HUF, which has strengthened since the end of April to near year highs against GBP and EUR, moving 6.5% and 5% respectively. Although rarely talked about it is important to keep track of minor European currencies as they point to what countries are able to do when they retain sovereignty. This move pointed to Hungary's improving economy and countries like Hungary would be in a lot worse position if they were tied into the Euro.
Enjoy your bank holiday weekend. Fingers crossed for some sun!
Written by David McNeill