Cable (GBP/USD) spiked overnight on the back of comments attributed to Mr Carney (Bank of England Governor) saying he “does not see a case for more QE in the UK”. We jumped up around 80 pips taking us over 1.61 the figure printing a high of 1.6135. We’ve since had a retracement back below 1.61. This is the part where I bang my drum and say “market orders market orders market orders”. If you’re a USD buyer from GBP you should look at placing orders at 1.6050/1.61. Anything above 1.60 is extremely good value. Market orders come into their own in exactly the scenario detailed above. You leave the office at 5pm on a Thursday, an order is placed in the market with us to execute at a certain level and if it spikes up overnight/very early morning then the order is filled for you automatically. It means you achieve a better rate than you would have done during the day and it is one less concern. If it doesn’t fill? Well, you’re in exactly the same position as you would have been. You can contact myself or one of the trading to discuss what achievable levels are and how to implement a market order.EUR/USD seems to be faltering at the psychological level of 1.35 however we’re still up for the day. There is not too much desire to push higher and consolidate it seems, to me. It has been range bound in the last few trading sessions with a high of 1.3533 printed yesterday. I expect downside momentum to resume with EUR/USD set to target 1.34 again over the next week or so. We had concerns from Italy leaving EUR/USD finishing on a negative tone yesterday with some lawmakers threatening to quit should Berlusconi face expulsion. Evidently, any political instability will weaken the EUR.
Mario Draghi is speaking today and a dovish tone is expected (No shock there then). During and after his speech I expect to see EUR/USD drop back below the 1.35 handle and continue its push south. If you’re a seller of EUR into USD I’d suggest it may be worth looking at covering off some of your exposure around these levels.
What then for GBP/EUR? Well, we’re still flirting with 1.20 however I expect this to be a medium term courtship. We jumped well above the 1.19 level due to Carney’s comments. We’ve since dropped back again below 1.19. The market is still adjusting to Carney. For a Central banker he’s extremely straightforward and to the point. There doesn’t seem to be too much ‘double speak’. It’s actually quite refreshing. However, it does mean we’re now prone to exaggerated moves providing more volatility in the market. We have CPI data out today from the Eurozone that will be an interesting figure to look at.
I expect EUR weakness to advance. If you’re a buyer of EUR from GBP I’d look at placing orders in the market at 1.19 and then stagger your average rate up over the next couple of months.
Please do get in touch if you have any comments/questions on the topics above.
Have a fantastic weekend
Written by Liam Alexander