GBP/USD prints fresh 2013 highs in the overnight Asian session. For those of you that had market orders in place to implement forward contracts over the weekend you have secured at the best rates of the year. There may be some further upside in December so if you know of your exposure for the beginning of 2014 it may be wise to secure at these elevated levels on GBP/USD. Sterling seems to be the currency of choice at present for investors. This morning we had Markit Manufacturing PMI out of the UK that came in better than expected with a reading of 58.4 compared with a consensus of 56. Is the UK firmly out the woods now in terms of recovery? I would urge some caution. It may be the case of the best looking in an ugly parade. UK PLC compared with the Eurozone and the US. Not too much competition there at present I’d suggest. The figures are improving and I believe the new Bank of England Governor, Mark Carney, is and will continue to do a good job. However, I think it somewhat premature to be discussing the UK being firmly on the right track and an expected upwards trajectory from now on. We will encounter various challenges and with Sterling being renowned to capitulate under any kind of bad news it is best to be risk adverse and lock in your currency. You don’t have to look back too far to remember when we were at 1.48 on GBP/USD. In fact, it was July. Only 5 months ago. It demonstrates how quickly things can change.Do you think GBP/USD will keep climbing higher? If so, I would implement a market order on a GTC (Good till cancelled) basis so that if/when that level is reached your order is executed automatically for you. If you want to protect your downside you can implement a Stop loss. This sets a ‘worse case’ level for you. You can utilise a mixture of the two in the form of an ‘OCO’ (One cancels other). This contract allows you to benefit from the upside as well as protecting yourself from the risk of the rate dropping.

Please contact me to discuss the above in more detail.

Well, well, well. GBP/EUR has moved through the 1.20 level. Finally! It has flirted all summer long with 1.20, danced a few slow dances but never did take 1.20 out on a proper date. It seems Christmas has come early for GBP/EUR. For those of you that had orders in at 1.20 you’ve achieved a very competitive rate of exchange. I now expect GBP/EUR to push on and upwards for the remainder of the year. I think it’s a case of Sterling strength however we’ll see some further EUR weakness towards the end of 2013. I expect further action to be taken to stimulate the ailing Eurozone economies early next year however there doesn’t seem to be any real will to do so before then. If you’re a EUR buyer I would look to stagger your levels upwards on a market order basis and look for spikes on an intraday basis on the back of data releases coupled with placing orders on the overnight market. Dependent on volatility in the Asian session you can secure your currency overnight at a rate that can be far higher than it will get to during the day UK time. Simply means you’ve achieved the best rate on a 24 hour basis.

Do you sell USD and EUR and convert back to GBP? I would love to be the bearer of good news however I don’t think rates will improve any time soon. My suggestion would be if you have to convert over the next few weeks look to work orders during the day/week with us. We will look for any dips in the market for you and try and execute your transactions for you at the best possible time.

The week has got off to quite a volatile start. I expect to continue in a similar vein. We have Bernanke speaking this afternoon at 13.30 (UK time) with some housing and construction data out of the UK tomorrow morning. On Wednesday attention turns to the Eurozone with the release of GDP data (QoQ) (Q3). Thursday we have UK data in the form of Bank of England Interest rate decision/Bank of England Asset Purchase facility announcement and then the interest rate decision from the Eurozone followed by the Monetary Policy statement and Press conference. This is followed by Annualized GDP (Q3) released from our friends across the pond. If you are deciding on whether to implement market orders this week my suggestion would be to put these in place prior to Thursday morning. The week of data releases is rounded off by Non-Farm payrolls and Unemployment data out of the US. The ‘NFP’ figure is the figure most traders await with most anticipation and therefore tends to be the most volatile. It has been rather subdued the past few months however I expect the figure out this week to move USD quite substantially against a multitude of different currencies.

Make sure you have a strategy in place to take advantage of the moves in the currency markets whilst also protecting against adverse movements. Foreign Exchange is a headache for most. We simply look to manage it for you in an effective manner. We can discuss graphs/charts etc however it is all smoke and mirrors. Does anyone 100% know where the rates of exchange are going to move to? Of course not. It is about having a strategy in place that limits your risk and allows you to gain from moves on the upside. Nothing more.

No doubt Christmas shopping has started for most and I’m sure some readers will actually be relieved to be back at work today.

If you have any questions on any of the above please feel free to contact me directly or one of the trading team.

Have a great week.

Written by Liam Alexander.