Sterling has had a tough time in recent trading sessions. We’ve dropped from highs of 1.20 on GBP/EUR this week back below 1.18 the figure. On Cable we’ve had a retracement downwards from the mid 1.62’s to the mid 1.60’s. Why? There hasn’t been too much data out today and with the NFP figure (Non-farm payroll) not being released due to the U.S. Government shut down traders are looking to take profit out of their positions. This is quite an unusual scenario as normally in the first week of the month the NFP figure is keenly anticipated and without it being on the docket traders are looking to close out positions before the weekend (I imagine some of them will be in a bar by now). The NFP figure has been pushed back a week to Friday 11th. However, that will only happen if the U.S. Government stop bickering, put their toys back in the pram and come to an agreement. Likely? Answers on a postcard please.Are you buying USD from GBP? Look at orders now at 1.6050. These are still very attractive levels compared with where we’ve been in the past couple of months. Evidently the Government shutdown proved damaging to the Dollar and it weakened off at the beginning of the week however the risk event hasn’t proved to be quite as damaging as some thought. Give it another week though and we could well be saying something different as some commentators are saying a sustained shutdown could affect the U.S. GDP figure negatively by 0.9%. The dollar has regained some of its losses from the beginning of the week and is finishing it off in positive fashion.

GBP/EUR is drifting lower and with our old friend/foe the single currency proving as stubborn as always I can see a short term downward move on the pair. We hit 1.20 and we’re now pulling back. If you have an outstanding EUR requirement to the year end it may be worthwhile looking to cover off some on a Forward contract basis. I still see further EUR weakness over the latter part of the year however I don’t expect GBP/EUR to move too much in either direction between now and December. If you think GBP/EUR will strengthen it may be an idea to implement a take profit order at 1.1850 and secure some of your exposure.

Please contact one of the trading team to discuss.

We’ve been very light on data today to round off the week. Next week we have a full calendar of data that will impact all the ‘majors’ considerably and I expect next week to provide us with more volatility than normal.

If you’d like to discuss your end of year FX strategy please let myself or one of the trading team know.

Have a fantastic weekend.

Written by Liam Alexander