Is the cable downtrend set to continue? It looks increasingly so. I would suggest 1.61 may be in view in the next month. I don’t see much upside in GBP/USD apart from occasional intraday spikes. I think Dollar strength is set to continue and this will drag the pair down to 1.61 the figure by the end of October. Are you a USD buyer? I would look to place market orders so you can take advantage of any spikes we may have. Alternatively, should you know your requirement for the remainder of the year it may be worth considering covering off the rest on Spot or alternatively a Forward contract out for 3 months. It gives you peace of mind that your currency is secure and you don’t have any more downside risk.Are you a seller of USD back into GBP? Things are looking better for you than they were just two months ago. Indeed, you are some 4% better off. If you have a requirement to convert back to GBP I would look to stagger your requirements at 1.63/1.6250/1.62 to try and achieve one of these levels. Please contact myself or one of the trading team to discuss your requirements.

GBP/EUR? Well, after the initial push higher we’ve retreated to the downside however I think this is a consolidative move rather than any significant change of direction. I expect further EUR weakness and with EUR/USD continuing its push lower I see no reason why GBP/EUR won’t push higher again. I would stagger market orders from 1.2750-1.2850. I think this will be the range for the next few weeks. After the recent volatility I expect more range bound activity over the coming weeks. I am sure some of you will be thinking “It’s going to go to 1.30”. It may well of course do. However, anyone that has had to deal with GBP/EUR and its penchant for tantrums over the years will know that we could be under 1.25 again quite easily. Do I think we’ll drop that far? No. I don’t see anything to suggest Sterling will be on the back foot although I don’t see any signs where Sterling is going to get a boost either. We’re at the mercy of the Eurozone/data/Draghi and general sentiment on the Euro. I believe the sentiment is to see the single currency lower so I will suggest we’ll get back to 1.2850 and potentially reach 1.29 in October. I think 1.30 will be a push however we may reach that level by the end of 2014. Feel lucky? Put a market order in at 1.30. We may clip that for you although there will be a lot of resistance at 1.30 the figure.

We have a heavy data week that may affect the EUR and US Dollar and in turn Sterling. Today we have unemployment data out of Germany. That is followed by inflation data in the form of CPI from the Eurozone. Should we have a poor figure then expect GBP/EUR to move higher. Across the pond tomorrow afternoon we have Consumer Confidence data out of the US. I would expect this to be strong number and the continuing good news out of the US will push Cable potentially under 1.62. Wednesday, we have GDP data from the Eurozone and ISM data out of the USD. These data releases have the capacity to move things. However, Thursday and Friday is where it may get interesting. Please contact us prior to Thursday should you be considering implementing market orders. The reason being? We have the ECB press conference on Thursday with Draghi speaking and I expect him to ‘talk down’ the single currency again. There is potential for a move higher. As always, with these events, there is increased volatility and the rate can change dramatically throughout the press conference. After his surprise with rates last time I expect that to remain as is. The Dollar is the currency in the limelight at the moment and all attention (as it always is on the first Friday of every month) will be on the NFP (Non-Farm payroll) figure. Will it be better than expected or will it disappoint? There will be increased volatility around this number and whether you are a USD seller or buyer you should have something in place prior to these events. As I often say, doing nothing is speculating.

Should you have any questions please let myself or one of the team know.

Have a great week.

Written by Liam Alexander