The EU summit gets underway this week with the first one being held on Thursday where ‘Brexit’ will be on the menu. Some reports suggest a deal is close, some say we’re about as far away as a reality tv ‘star’ is to winning the Nobel Prize.
Sterling has recovered some fighting spirt over the past few trading sessions and is shrugging off the UK Prime Minister’s ‘it’s my way or the highway’ line on the deal to be put forward to the EU. Time will tell if this tactic is correct or we stumble out without a deal. Dependent on the EU stance this week, Sterling may be due another upside move.
Sterling has rallied against the Dollar and has pushed through 1.31 the figure. This is the highest it has been in 6 weeks.
You can view the movements on the graph below –
GBP/USD - 1 Week
If you have a requirement to purchase USD from GBP I would consider locking in some on a SPOT basis. Please contact the trading department for a rate of exchange.
In addition, with Q4 just around the corner and Q1’19 likely to prove extremely volatile for Sterling do consider discussing Forward Contract’s and the margin required to mitigate your risk. Feel free to contact me directly on this.
From the UK this week, other than political pillow fights, we have inflation data out in the form CPI (YoY) and Core CPI (YoY) August. Expectations are for a print of 2.4% and 1.8% respectively. We also have Retail Sales ((YoY) and (MoM) Aug out of the UK. Expectations on the monthly release are for a print of -0.2%. Sterling may have a slight wobble around the release of this figure. We also have the Bank of England Quarterly Bulletin out on Friday rounding off the data for this week from a UK perspective. Should there be any soundbites picked up on in relation to Brexit expectations then Sterling may move on the back of it.
This pair may have some volatility in it this week with the ECB President, Mario Draghi, speaking on a couple of occasions. Add in the EU summit and the potential for various remarks to move either Sterling or Euro then we could see GBP/EUR break through 1.13 the figure or shift back below 1.12. Sterling/Euro has traded under 1.11 in August so if you have a requirement to purchase EUR from Sterling I would consider locking in some on a SPOT basis and then implement a market order at 1.13 should Sterling have a rally this week.
You can view the movements on Sterling/Euro on the graph below –
GBP/EUR - 1 Week
If you have a requirement to sell EUR/GBP I would think about implementing some market orders to the downside to take advantage of any moves in this direction. However, as I’m sure you’re bored of me saying, doing nothing is speculating. EUR/GBP is still at a good level historically and should you have a requirement to purchase Sterling consider giving yourself a price point to work from by executing some on a SPOT basis at present to mitigate any risk should EUR weaken.
If you have any questions on your individual requirements please feel free to get in touch directly.
Have a fantastic week.
Written by Liam Alexander