EUR/USD touched 1.38 in the London session early this morning continuing the momentum from Friday. We’ve had a slight drift lower to the 1.3770 area however bias remains for another push to 1.38 the figure. The Inflation estimates for February came in above consensus hence the sharp rally to the upside on the Friday session for the single currency. Will EUR/USD continue upwards to 1.40? I doubt it very much. I think we’re due a retracement on EUR/USD and we’ll be under 1.37 this week. The ECB council meeting on March 6th is attracting a lot of market attention with divided views on whether more policy easing will be announced. I would suggest however that rates will remain on hold.We’re back to range bound trading on GBP/EUR which is rather dull to say the least. We’ve been trading in a 40 pip range today and we’re steady above 1.21, which from an historical view, is very attractive indeed. Of course, everyone wants a higher rate now we’re at these levels. Where should you look to place a market order to take advantage of upcoming EUR weakness? I would suggest placing an order at 1.22. Do I think we’ll go much higher? We won’t for a while however I do think there is more in GBP/EUR this year. As I’ve said many times, anything above 1.20 is good value on GBP/EUR. I’m sure you all remember trading around 1.15 in the not so distant past. We have Mario Draghi, the ECB president, speaking this afternoon so we may see some volatility on EUR crosses.

Please contact myself or one of the trading team to discuss implementing market orders on GBP/EUR at the appropriate levels.

GBP/USD is looking toppish to me. We have had a spike from daily lows in trade today on the back of a better than expected UK manufacturing PMI reading with GBP/USD moving a half cent upwards. We also had UK Mortgage Approvals rising to the highest level in six years. I think GBP will continue to do well this year however I’m of the opinion that USD strength will be the major theme later this year.

If you have capacity to purchase USD from GBP I would suggest current levels are very attractive and you should look to cover off the remainder of your Q1 exposure. We may push higher however there will be a lot of resistance around 1.70. With the Fed expected to continue its tapering program I still maintain we’ll see a bout of sustained US dollar strength this year. If you know your costed levels for the year and you have the ability to book forward contracts this may be something to consider. You lock in a currency profit for the rest of the year.

In terms of data this week the main figure to look at is the NFP figure (Non-farm payroll) on Friday. The forecast rise is for 149K in February. With poor weather affecting much of the US last month it wouldn’t surprise me to see a figure below the forecast. This may see GBP/USD push higher short term. Should you think this the case please contact one of the team to discuss implementing market orders to take advantage of any spikes towards the end of the week.

Have a great week.

Written by Liam Alexander