‘Tis the season. On the first day of Christmas my true love gave to me, a General Election. Nothing quite screams festive fun than standing in a queue outside some horrendous building, in the cold, then putting an X on a ballot paper next to one of the great leaders of our time.
Irrespective of the election result suffice to say that we are in for a good few years of political and economic upheaval. In terms of potential currency movements around the General Election? I expect a Conservative majority and therefore a Sterling rally. What level might Cable (Sterling/Dollar) test? I expect a move to around 1.33-1.35 on GBP/USD. A lot of the move will already have been priced in so I don’t expect a huge move. If we see a Corbyn victory or a hung parliament then expect Sterling to fall.
If you hold Sterling and need to purchase USD I would look at implementing take profit orders prior to the General Election on the 12th December. By doing so, you allow yourself the opportunity to take advantage of any moves in your favour. If you are looking to purchase USD before year end I would target 1.33 the figure. To put that into context the high over the past 12 months has been 1.3317. You would achieving the high of the market over the past 12 months. Please contact one of the trading team and they will be able to implement an order for you.
If you are selling USD consider locking in some Sterling now on a SPOT basis. I do think GBP/USD pushes higher from where we are now. Historically, you are still at fantastic levels to go back into GBP. In two years’ time we may back around 1.43 or so. Of course, recent history has told us that what we expect to happen rarely does. Please take a risk averse approach in the run up to the end of year. If you would like a rate to sell USD please get in touch with your relationship manager or one of the trading team and they will be able to assist you with your individual requirements.
In terms of recent moves on Sterling/Dollar you can view these in the graph below –
On the data front this week we are relatively light. The main release of note around the Dollar is the NFP figure (Non-Farm Payroll). The expected print is 183K. Should we see any signs of an improvement then the dollar may show some gains.
In terms of Sterling/Euro we are now pushing upwards to the highs of the past 24 months. If you have a requirement to purchase EUR from GBP I would consider covering off some on a SPOT basis. Please contact one of the trading team and they will be able to provide you with a rate of exchange. In addition to taking advantage of the recent moves I would consider looking at a take profit order on GBP/EUR around the election date. As detailed above, I do expect to see some Sterling strength so whilst you cover off some on a SPOT basis to protect any risk of a downside move you allow yourself the potential to take advantage of any move higher. Might we see 1.20 on Sterling/Euro in December? Potentially. Please contact the trading desk and they can discuss your individual requirements with you.
You can view the recent movements on the Sterling/Euro graph below –
The next 10 days is going to be dictated by the UK general election. Political posturing, TV interviews and debates and point scoring will continue. The word ‘clarity’ is mentioned repeatedly. Will we get some more clarity after the General Election? Yes. Does that mean the journey is complete? It’s only getting started.
If you have any questions please do let me know.
Have a fantastic week.
Written by Liam Alexander