So today is officially ‘sickie’ day. The short mornings coupled with the financial hangover from Christmas has fully kicked in and no-one, it seems, wants to go to work and would rather have a ‘duvet day’. So it seems has Sterling. It has come off this morning against the EUR and USD after a ‘poor’ Markit Manufacturing PMI figure of 56.7. The market consensus was for 57 so we’re under expectations and therefore the market has taken this as a disappointment hence the sharp downward move in GBP. I would argue however that the figure is rather good as a reading above 50 indicates expansion. Yes, the Jan figure is below that of December’s however it is still above average market growth in the sector. With the PMI figure out of the Eurozone coming in above market expectations it has pushed GBP/USD to multi week lows. GBP/EUR has beaten a retreat and dropped 100 pips since its high this morning.Have you covered off your Q1 exposure yet? GBP/EUR is still at very attractive levels and you should look to cover off a portion of your EUR exposure. Please contact one of the trading team to discuss what levels to consider. I would suggest utilising a mixture of Spot transactions with Market orders. Think GBP/EUR will continue to push up? Perhaps look at 1.2150 as a strike rate. GBP/USD has been fairly stable of late however we’ve retreated from highs of around 1.65 in the past few months. I’ve said time and time again that anything above 1.60 is considered good value. If you can achieve 1.62 and upwards I would look at securing at these levels. Might we rocket up to 1.70? Perhaps however I think it unlikely over the next few months. If we raise interest rates before the US and Eurozone then we should see a strong pound however that is a debate for another day. One for the beginning of 2015 perhaps as I don’t think we’ll see rate rises prior to then.

What do we have out this week? We have Tier 2 data out tomorrow and Wednesday. These releases will provide some volatility however the market will focus its attention towards Thursday and Friday this week. Out of the UK we have the BoE Interest rate decision along with the BoE Asset Purchase facility. Look to place market orders prior to this if you are converting GBP into USD. Following these releases from the UK we have the ECB interest rate decision. I expect all of these to remain unchanged. On Friday we have the main figure and historically the release that provides the most market volatility. It is of course the NFP figure (Non-Farm Payroll). Expect a significant amount of movement on USD crosses on Friday afternoon (UK time).

If you would like to discuss your currency strategy for the rest of the year and Q1 in particular please get in touch with one of the trading team.

Have a great week

Liam Alexander