GBP/EUR is in flirtatious mood once again with its courtship of the 1.20 level proving fruitful of late. Is 1.21 feasible? After the ECB rate cut of 0.25% yesterday anything seems possible with the EUR. To give you an idea of how unexpected it was only 3 out of 70 leading economists called the rate cut, it was expected to happen in December. Interestingly Draghi didn’t try and talk down the single currency at the press conference. Some have called the strong EUR a reason for the sluggish growth throughout the Eurozone. As regular readers of this report will know I have said the EUR has been over valued for years now. I would suggest that the 1.20 level is ‘fair value’ on GBP/EUR. Do you still need to cover off your remaining EUR exposure for this year? I would look at placing an order at the 1.20 level over the course of the next week. Contact myself or one of the trading team to implement an order. I can’t emphasise enough about securing at 1.20 if you can. It may well push up to 1.21/1.22 however a short time ago we were in the 1.17’s. Although we had Services PMI data released out of the UK on Tuesday that was at its best level for 16 years, I am still of the opinion that any move is EUR related rather than anything to do with Sterling strength.The NFP figure released today was much better than expected and we saw the expected move of EUR/USD downwards. It wasn’t as volatile as expected and EUR/USD shifted around 50 pips to the downside. The US created 204K jobs in October, the expectations were for 125K new jobs to be created so the figure was very positive especially when factoring in last month’s government shut down. The unemployment rate was up slightly at 7.3% although that is in line with expectations.

GBP/USD? Where now? Never thought I’d say this however GBP/EUR is now looking more interesting than Cable. We’re pretty much finishing off the week bang on 1.60 the figure. I would look at placing market orders to buy USD from GBP at 1.60. We might push up however I don’t see any massive moves to the upside over the last 6 or so weeks of the year. If you can lock in at 1.60 I think that’s a fair value level on an annual basis for GBP/USD. Selling USD into GBP? I would stagger your sell orders at 1.60/1.5950 and 1.59.

If you would like to discuss your end of year Strategy or are now looking at budgeting for 2014 and want to know how to factor in your FX costs or protection against adverse FX fluctuations please get in touch. We’ll be happy to discuss with you.

Have a fantastic weekend

Written by Liam Alexander.