One week until Christmas Day. The Christmas jumper has been wheeled out once and been retired for yet another year. Mince pies have been eaten. A Christmas theatre show has been done. Christmas shopping? I’m kicking that can down the road for a little while longer! It’s almost as unbearable as listening to Justin Bieber sing a Christmas song. Or any song for that matter.
What will the final week before Christmas day bring in the currency markets? I imagine it will certainly be quieter than the throngs of shoppers on Oxford Street fighting for a Tamagotchi or Nerf gun or whatever the latest craze is. Markets will start to ease this week with currencies likely to trade in narrow ranges unless something dramatic happens in the political or Brexit sphere. Everyone will start to decamp for the year so liquidity will start to thin out. As you can probably expect economic releases are rather limited this week. We had inflation data out of the Eurozone this morning with CPI (MoM) and (YoY) coming in at 0.1% and 1.5% respectively. This was in line with expectations.
Last week we had a busy week with the Bank of England, ECB, and Federal Reserve meeting. As expected, the Bank of England meeting was a non-event. Interest rates were kept on hold on 0.5%. The ECB (European Central Bank) met and communicated that interest rates are to stay at current levels for an extended period. The Federal Reserve increased interest rates to 1.5% in line with expectations.
We have been trading in a relatively tight range for quite a while now. You can view movements last week on the graph below –
Going into the final few trading days of 2017 do consider a Forward Contract up until end of January ’18 to take some of your risk off the table when purchasing Euro’s from GBP.
I expect GBP/EUR to come under some pressure with the Eurozone growth forecasts looking strong for next year. This year, the Euro is up over 4% against Sterling and I don’t see much to think that Sterling is going to be stronger than the single currency next year. Theresa May and the elves will need to work hard in the Christmas factory to prepare for next year. Trade talks will be more challenging than the negotiations we’ve had up until now.
If you are selling Euro’s to purchase Sterling please get in contact with the trading department. My suggestion is to implement market orders to the downside to take advantage of any moves over the festive period.
If you have a requirement to purchase USD I would look to convert some on a SPOT basis at current levels. We’ve recovered from the 2 week low and are trading back above 1.34 the figure. This to me looks toppish for the year and I would expect a retracement back down to our end of year forecast of 1.32. If you would like a SPOT rate please contact the trading department directly.
You can view movements last week on the graph below –
The dollar has been under pressure since the Federal Reserve disappointed investors by not signaling a series of quick rate increases in 2018 and two policymakers voted to keep rates on hold. There is also still a chance of a Government shut down in the US on tax reform concerns although I expect this to be resolved. The Dollar will be under some pressure until this is rectified although I expect a Dollar recovery. The main release this week will be the US GDP Annualised (Q3) figures that is expected to print 3.3%.
If you hold USD and are looking to convert back to Sterling I would implement market orders to take advantage of a potential Dollar bout of strength in the closing stages of 2017.
Please get in touch in the coming days should you have any currency requirements this week.
We will be open in between Christmas and New Year bar bank holidays.
Have a very Merry Christmas and best wishes to you and family over the festive period.
Written by Liam Alexander