With the cold months becoming a distant memory (for another six months at least) Sterling goes into Q2 with a feel good factor. Cable is back to its previous lofty heights. Have you locked in your Q2 exposure on GBP/USD yet? If you haven’t now is a good time to do so. We’re up around 1% from a couple of weeks ago. Please contact myself or one of the trading team to discuss your requirements. The US Dollar hasn’t seen much traction in Q1 with the withdrawal of QE by the Federal Reserve or the improving US economy. It will be interesting to read US data in Q2 as I still maintain the view that we’re in for a stronger US Dollar in Q2 and throughout the rest of 2014. I would expect a rebound from our friends across the pond so that will push GBP/USD lower. I believe we’ll be back to trading around the 1.60 level in the latter part of the year. That will be quite a shift from where we are now however GBP/USD can move significantly. If you look at a 10 year graph the variance has been around 55% ranging from 2.11 to 1.36. Someone once said “if you do nothing you’re speculating”. Should you think GBP/USD will climb higher in the short term please look to implement a market order to take advantage of any spikes on an intraday basis. Should you think we’re toppish on GBP/USD look to execute on a Spot basis or look at utilising a forward contract to mitigate against any currency fluctuations.Data this week that will provide us with a direction for the US Dollar will of course be the NFP (Non-farm payroll) figure. We’re expecting a jump to around 195K with a drop in the jobless rate to 6.6%.
GBP/EUR? Yup, you guessed it. We’re neither up nor down and are stuck in a range that seems to have lasted longer than potentially David Moyes reign at Manchester United will. GBP/EUR should be higher however we know how resilient and stubborn the single currency is. If you can achieve 1.20 on Spot or a forward contract basis I would argue that is a favourable rate of exchange and towards the top end of the range. The focus on the Eurozone this week is around the ECB meeting. Nothing is expected to change however Mario Draghi’s commentary will be keenly listened to. I think we all know that policy will be left on hold however the ECB has enough weapons in its armoury should the ECB need to take action to counter any deflationary risks. Draghi however may discuss the strength of the EUR in his speech. This could shift EUR/USD and in turn push GBP/EUR higher or lower. Please have a strategy in place for Q2. If you haven’t already worked out how you’re going to manage your FX risk for the next 3 months please contact myself or one of the trading team to implement a strategy that will best suit your requirements.
On the data front out of the UK this week we have a few economic announcements that should support Sterling. We have BoE Governor Carney speaking this evening and we also have Markit Services PMI. I expect the data to remain strong so that should give us an indication that UK PLC is continuing in the right direction.
Should you have any questions please do let me know.
Have a great week.
Written by Liam Alexander