Sterling has dropped further this morning against the US Dollar. Indeed, it has dropped 3% from where we were a week ago. Evidently sentiment and the prospect of an independent Scotland is driving the pound lower. Is it more of a reactive emotional move rather than a fundamental downside move though? I think after the weekend reports we may see GBP/USD settle slightly and hold around 1.60/1.61 however if we break below the key resistance level of 1.60 then it opens the door to not only 1.55 but potentially the low 1.50s dependent on the vote in 9 days’ time. However, today may provide some respite for Sterling. Mark Carney, Governor of the BoE, is speaking today so he may make some positive noises that may shift some of the focus. Indeed, if the data comes out better than expected then we may actually see a nice bounce higher. If you are a USD buyer please implement a market order and try and catch any spikes on an intraday basis. I still believe we’ll see GBP/USD lower. Notwithstanding the negativity and uncertainty surrounding the pound our cousins over the pond are betting on economic reports released later this week will give credence to the case that the Federal reserve may boost interest rates next year. Interestingly, Fed policymakers meet on September 16th-17th. A day before Scotland votes. I would suggest you need to have a plan in place prior to these dates as we may be in for volatility we haven’t seen in a long long time. GBP/USD may gain 5 cents in a day. It may lose 5 cents in a day. Or it may do absolutely nothing. Please do however plan for the worst and have a strategy in place. Doing nothing is speculating.If you have any questions or would like to speak with one of the team at Aston please get in touch.
Written by Liam Alexander